War economy: Russian economy minister warns of recession

St. Petersburg. Russia's political leadership has issued an unexpectedly clear warning of problems for the Russian economy. "According to the figures, we are experiencing a slowdown; according to the current sentiments of entrepreneurs, we are already on the verge of entering a recession," said Economy Minister Maxim Reshetnikov at the St. Petersburg International Economic Forum (SPIEF). He criticized the central bank's policies and warned of a slump in investment.

The current interest rate level is discouraging entrepreneurs from investing, Reshetnikov said. The Central Bank recently reduced the key interest rate slightly from 21 to 20 percent. The minister estimates that investments in the third and fourth quarters could be below the previous year's level.

Central Bank Governor Elvira Nabiullina defended herself against accusations of misguided monetary policy, but she also predicted difficulties. Russia's economy had grown for two years despite the sanctions through import displacement programs – thanks to funds from the Prosperity Fund and existing capital reserves in the banking system. "We must understand that many of these resources have indeed been depleted, and we must think about a new growth model," she said.

Russia has been waging war against Ukraine for three years. The country's growth in recent years has been primarily based on massive rearmament and increased spending on military and security.

RND/dpa