Russian Economy on the Edge: Minister Reshetnikov Warns of Imminent Recession due to High Interest Rates
Russia's Economy Minister foresees the nation teetering on the edge of economic contraction.
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Maxim Reshetnikov, Russia's Economy Minister, has issued a stark warning about an impending economic slowdown: the nation stands on the precipice of a recession, he stated at the St. Petersburg Economic Forum. With an increasing number of businesses grappling with financial woes, it's their struggle with crippling loans, taken out at sky-high interest rates, that's causing the most concern. This implicit critique also extends to the central bank's monetary policy[1].
In the past two years, Russia's economy had seen robust growth, with 2024 registering a rate of 4.1%, according to official records[1]. However, economists argue that these growth figures are driven by unsustainable military spending, which doesn't mirrors real productivity gains. In the first quarter of the current year, Russia's GDP expanded by a modest 1.4%.
A chorus of voices, including Reshetnikov himself, has raised concerns about the exorbitant interest rates in recent weeks. The current key interest rate hovers around 20 percent, set to counteract rampant inflation within the country. Consumer prices have been skyrocketing for months, with inflation reaching almost 10% in May[1].
Expanding on his comments in St. Petersburg, Reshetnikov told reporters that he hadn't predicted a recession, rather he said the economy was "on the brink." The future course is contingent on the state's decisions in the coming weeks. "If every decision is correctly implemented, we can dodge the recession," he said[1]. He plans to reassess the situation in August, once most decisions have been made and the impact of previous choices is clear[1].
[1] ntv.de, AFP
- The staggering interest rates, with the key rate hovering around 20 percent, are causing concern within Russia's business community, as they struggle to repay loans taken out in these unfavorable financial conditions, challenging the effectiveness of the central bank's monetary policy.
- Amidst the looming threat of a recession, Russia's Economy Minister, Maxim Reshetnikov, has proposed a series of proactive measures, emphasizing the importance of revising the nation's employment and community policies, in an attempt to bolster businesses, stimulate economic growth, and avoid a potential recession.
