Source: Financial Associated Press
Financial Union, August 28 (Editor Niu Zhanlin)At a cabinet meeting chaired by Russian President Vladimir Putin on Wednesday local time, Russian Finance Minister Siluanov said that Russia's economic growth forecast in 2025 has been significantly lowered from the previous 2.5% to 1.5% as high interest rates implemented to curb inflation have suppressed credit demand.
Russia's "wartime economy" grew strongly by 4.1 per cent in 2023 and 4.3 per cent in 2024, far outpacing the performance of the G7 countries, despite several rounds of western sanctions since the conflict broke out in 2022. However, the economy has slowed significantly this year.
Russian Economic Development Minister Maxim Leszetnikov warned in June that the Russian economy is on the brink of recession, and that monetary policy is key to reversing this trend.
As military spending reached its highest level since the Cold War, inflation pressure rose sharply, forcing the Russian central bank to raise key interest rates to 21% in October last year, the highest record in more than 20 years. Since then, the central bank has dropped to 20% in June this year and further dropped to 18% in July, but analysts noted that high financing costs and labor shortages still constrain economic growth.
Siluanov said: “This year, in the context of still paranoid monetary credit policy, economic growth is not expected to be below 1.5 percent, according to the latest assessment of the Treasury Department,” he added: “A balanced fiscal budget will create conditions for central banks to further relax monetary policy, thereby reducing financing costs.”
Resident deposits continue to rise
According to data released by the Central Bank of Russia this week, in the context of high interest rates, Russian residents’ deposits continued to boom, increasing by 8% in the first seven months of the year, to 43.6 trillion rubles (about $542 billion); if combined with all sorts of account funds, Russian residents’ total deposits in banks have reached 61.1 trillion rubles, a record high.
According to reports, interest income from deposits can now cover about 10% of Russian households 'annual expenditures. Dmitry Breitenbicher, a member of the board of directors of VTB, Russia's second-largest state-owned bank, previously stated that the bank estimates interest income from residents 'deposits in the first half of 2025 to be 4 trillion rubles, a year-on-year increase of 150%.
During Putin's presidency from 2000 to 2008, the size of Russia's economy soared from less than US$200 billion in 1999 to US$1.7 trillion. However, Russia's nominal GDP is currently only US$2.2 trillion, basically the same as in 2013.
At the meeting, Putin told Siluanov and other cabinet officials, “There are many details about ensuring economic growth, and there are constant disputes between governments, central banks and experts about the benchmark interest rate and the overall economic situation.”
First Deputy Prime Minister Denis Manturov said manufacturing is expected to grow by about 3 percent this year, down from the previous forecast of 4.3 percent, and industrial production is expected to grow by about 2 percent, down from the previous forecast of 2.6 percent.
Data released earlier this month by the Federal Bureau of Statistics showed that Russia’s GDP grew by 1.1 per cent in the second quarter of 2025 compared to 4.0 per cent in the same period last year.
According to the latest forecast of the International Monetary Fund (IMF), the Russian economy will grow 0.9 percent this year, below previous 1.5 percent expectations.
Analysts said that as the economy slows and Russia and Ukraine continue to spend heavily on the battlefield, Russia may have to raise taxes and cut spending to balance its finances in the future.