Economic Growth in Russia Slows Down, Experts Differ on Prognoses
Russia’s economic growth has slowed down, as shown by a decline in the gross domestic product (GDP) and industrial production. However, experts are not in agreement on the trend’s future development, with some believing it will continue and others thinking it is a temporary and partly illusory phenomenon that will be replaced by new economic indicators in the future.
According to the RBK portal, the growth rate of Russia’s GDP has decreased to 0.8% on a yearly basis in February, down from 3% in January. The Ministry of Economic Development attributed this dynamics to the calendar factor, as there was an extra day in February 2024 due to the leap year. Without this factor, the economic growth in February would be comparable to that of January, the ministry said. Nevertheless, some economists have reported a slowdown in economic activity and even signs of stagnation.
Alexander Shokhin, the head of the Russian Union of Industrialists and Entrepreneurs, recently stated, “The slowdown in the economy is a fact.” Maxim Reshetnikov, the head of the Ministry of Economic Development, also commented on the signs of a cooling down of the economy.
Anton Tabach, the chief economist of the rating agency “Expert RA”, predicts a 1.5% growth of the GDP in 2025, compared to 4.1% previously and believes this indicates stagnation. He referred to the forecasts of the Bank of Russia, saying it was the central bank’s intention to cool down the economy when it introduced a high interest rate.
However, some experts consulted by RBK disagreed with the assumption of a stagnation of the Russian economy. They believed that there would be a “short-term slowdown of the economy” in the early part of the year, typical of the adjustment to the new level of the base rate and that the economy would then grow again. The weakness of economic activity was reflected in the dynamics of the export-oriented sectors, not in those of the domestic demand, they said, even stating that the data, when adjusted for seasonal and calendar factors, showed the slowdown was mainly in the export-oriented sectors, particularly in the extraction of raw materials, as these are influenced by external factors.
Experts expect the “bottom will be really reached in mid-2025, perhaps even in the second half of the year and then there will be a period of relatively slow economic growth.” Tabach believes it is important to initiate a relaxation of monetary policy in a timely manner to prevent a deep stagnation due to the higher tax burden from 2025 and the fact that companies “have less money, to be honest.” He emphasized, “So that there is no delay, the Bank of Russia must start the relaxation of monetary policy in a timely manner.