Russia ‘on the verge of going into a recession,’ economy minister warns – National

Russia The economy is about to slip into the recession and monetary policy decisions will now determine whether it falls into one or not, warned the Minister of Economy Maxim Reshetnikov on Thursday.

Reshetnikov delivered the message of time to the annual economic forum of Russia in the Russian city in the north of Saint Petersburg, an event sometimes called “the Russian Davos” which is intended to promote investments in the Russian economy.

He urged the Central Bank to support the economy with regard to monetary policy, because the Kremlin said that the current key interest rate – 20% – put a break on the economy even if it was a conscious decision.

This month, Russia has reduced interest rates for the first time since 2022, but borrowing costs are close to record levels and for months, companies have complained of high investment rate.

The central bank has maintained high rates to limit inflation in the overheated economy, which focuses on the needs of military fighting Ukraine.

“Depending on the figures, there is cooling, but all our figures are in the rear view mirror,” said Reshetnikov on a panel of the Saint Petersburg International Economic Forum.

“According to the current feelings of companies and commercial indicators, we are already, it seems to me, about to go to the recession. On the edge.”

Reshetnikov said that a recession was not inevitable and then told journalists to avoid one would especially depend on political decisions, especially interest rates.

“I have not predicted a recession. I said that we are at the edge. From now on, everything will depend on our decisions,” he said.

In addition to keeping faith with the objective of inflation of 4% of Russia, Reshetnikov said that it was in favor of “giving the economy a little love”, addressing the governor of the central bank Elvira Nabiullina, who was on the same panel.

President Vladimir Putin in March urged his economic officials not to freeze the Russian economy as if she were in a “cryotherapy chamber” with high borrowing costs and Reshetnikovs previously warned against the risks of “hypothermia”.

For the moment, the prospects do not seem promising.

The macroeconomic analysis center and short -term forecasts, an economic reflection group close to the government, said this week that most civil sectors are in recession and that there is no sign of what can launch economic growth.

“It seems that a” economy of stagnation “has been formed,” wrote analysts of reflection groups.

During the session on Thursday, the governor of the central bank Nabiullina, said that the current slowdown in GDP growth was “an overheating outcome”. Finance Minister Anton Silianov said that there was a cooling in Russia, but that “summer still follows a cold snap”.

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Alexander Vedyakhin, assistant CEO of the largest lender in Russia, Sberbank, said in an interview with Reuters this week that tight monetary policy created excessive cooling risks and said that much lower interest rates from 12 to 14% were necessary to restart investment loans.

The economy, struck by a multitude of sanctions after the Kremlin sent troops to Ukraine in February 2022, has so far upgraded the predictions. High defense expenses have propelled growth and have maintained low unemployment despite fed inflation. At the same time, wages have increased to monitor the pace of inflation, which has left many workers better.

The major recruitment bonuses for military commitments and death services for those who are killed in Ukraine have also put more income in the poorest regions of the country. But in the long term, inflation and the lack of foreign investments remain threats to the economy, leaving a question mark on the duration of the duration of the militarized economy.

Economists have warned of increasing pressure on the economy and the probability that it would stagnate due to the lack of investment in sectors other than the army.

(Report by Reuters in Saint Petersburg, Darya Korsunskaya in London and Elena Fabrichnaya in Moscow; writing by Alexander Marrow; edition by Andrew Osborn and Toby Chopra)

—The additive files of the Associated Press

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