Russia’s largest lender, Sberbank, has warned that the country’s economy is entering a phase of technical stagnation, cautioning that high interest rates could trigger a recession if left unchanged.
Finance Minister Anton Siluanov recently told President Vladimir Putin that economic growth in 2025 is expected to slow to 1.5%, well below the earlier 2.5% forecast. The slowdown comes as high interest rates, introduced to curb inflation, continue to suppress borrowing and investment.
Speaking at the Eastern Economic Forum in Vladivostok, Sberbank CEO German Gref said rate cuts planned for this year may not be sufficient. The central bank is expected to reduce rates from 18% to 14% by year-end, but Gref argued that recovery requires much lower levels.
“At current inflation, economic revival is only possible at 12% or below,” Gref noted. “It is important to move out of controlled cooling before it turns into stagnation, as reviving the economy will be much harder later.”
The Bank of Russia will hold its next rate-setting meeting on September 12, with markets closely watching whether policymakers accelerate rate cuts to ease pressure on growth.
Looking Ahead
With borrowing costs still at multi-year highs, Russia’s economy faces a delicate balance between controlling inflation and avoiding prolonged stagnation. The path the central bank takes in the coming months may determine whether the slowdown drifts into recession.
