Russia’s economy slipped into “technical stagnation” in the second quarter, Sberbank CEO German Gref warned, cautioning that the central bank’s tight monetary policy risks pushing the country into recession. He noted that recent data from July and August showed growth had slowed to nearly zero.
Gref argued that the central bank’s current interest rate trajectory would not be sufficient for recovery. “According to our estimates, the rate will be around 14% by year-end. Recovery is only possible when the rate drops to 12% or lower,” he said. Russia’s key rate, raised to 21% in 2024 to combat inflation, has since been lowered to 18%, but remains high as government spending continues to surge.
Economic officials have echoed similar concerns. The economy is reportedly cooling faster than expected, with next year’s growth forecast cut from 2.5% to around 1.5%—and possibly closer to 1.2%. Meanwhile, Russia’s budget deficit reached 4.88 trillion rubles ($61.1 billion) between January and July, surpassing its full-year target.
Falling global oil prices, a stronger ruble, and Ukrainian strikes on energy facilities have further weakened revenues. Oil and gas income dropped 36% in August to the lowest level since mid-2025, compounding fiscal pressures as the government moves to restrict fuel exports to stabilize domestic prices.