Decelerated Expansion
In a recent report by RIA "Novyi Den" published in Moscow, it is revealed that the Russian economy's growth rate has slowed down. The information presented in the article is derived from the Russian Ministry of Economic Development's overview, "Current Situation in the Russian Economy."
The slowdown in the growth rate of the Russian economy in 2025 is primarily caused by several interrelated factors. The unwinding of wartime fiscal stimulus and resulting economic overheating has led to high inflation and cost of living pressures. The Central Bank of Russia's aggressive tightening of monetary policy, with interest rates reaching a historical high of 21% in October 2024, has further curbed credit and corporate lending.
The impact of sanctions and weak demand, particularly in the manufacturing sector, has also contributed to the slowdown. Russia's heavy dependence on oil and gas revenues has been affected by falling oil prices in 2025, reducing crucial revenues and limiting government fiscal capacity. Weak domestic and global demand has led to declining new orders and exports.
Industrial contraction and employment cuts are further indicators of the economic slowdown. Manufacturing activity contracted sharply in June 2025, with the Purchasing Managers' Index dropping below 50, signaling a contraction. Factories responded by cutting jobs at the fastest rate since early 2022 and reducing purchasing, reflecting worsening business sentiment.
Despite defense expenditures remaining very high (around 6.3% of GDP), this war-driven spending does not translate into broad-based economic development or productivity gains. Civilian sectors are stagnating or contracting, and many companies are struggling to meet wage obligations.
These combined issues are pushing Russia's economy toward a recession or at least a prolonged period of slow growth in 2025. The government and central bank appear to be shifting focus from growth to managing a "soft landing" to avoid a deeper recession.
It is important to note that the article does not provide information about the growth rate for the month of May or April, nor does it offer any forecasts for future growth rates of the Russian economy. The article also does not discuss any potential reasons for the slowdown in the Russian economy's growth rate or provide any new analysis or interpretation of the Russian economy's growth rates.
The author of the article is Anastasia Smirnova. For the first five months of the current year, the Russian economy's growth rate stood at 1.5% year-on-year, and in May, the growth rate was 1.2% year-on-year. The current growth rate of the Russian economy, as of the publication date, is not specified in the article.
The slowdown in the growth rate of the Russian economy is attributed to a combination of factors, including the unwinding of wartime fiscal stimulus, high inflation, and the Central Bank's monetary policy tightening. Additionally, the impact of sanctions, weak demand, and declining oil prices have further exacerbated the situation, causing industrial contraction and employment cuts in the business sector.
