Maxim Reshetnikov Slams High Interest Rates, Warns Russia on Verge of Recession
Economic Minister Reschetnikov foresees Russia on the edge of a recession
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Russian Economic Minister Maxim Reshetnikov has issued a stern warning: Russia is precariously close to sliding into a recession. At the St. Petersburg Economic Forum, he took a swipe at Moscow's central bank policies and the high-interest rates gobbling up businesses.
It's no secret that Russia's economy has been pumping iron since 2023, with military spending leading the charge. In 2024, the rate soared to a solid 4.1 percent growth, thanks to hefty defense expenditures. But economists are quick to point out that these pockets of growth aren't sustainable or indicative of genuine productivity gains. In fact, the economy expanded by a mere 1.4 percent in Q1 of this year.
In recent times, Reshetnikov and several other industry insiders have spoken out against the heroic interest rates. The key rate currently clocks in at 20 percent, with the bank of Russia playing the inflation-fighter. Consumer prices have skyrocketed for months, with inflation standing at almost 10 percent in May.
When the press had a chance to chat with Reshetnikov, he clarified that he hadn't actually predicted a recession. Instead, he emphasized that Russia is "on the brink." The state's moves in the next few weeks will decide the economic fate. While the minister expressed optimism that the right decisions would prevent a downturn, he's promised to reassess the situation in August.
Critics argue that high-interest rates impede growth by stifling domestic demand and investment. They also hinder wage growth and contribute to inflation by tightening monetary conditions. These conditions stall economic expansion and make a stable recovery hard to come by. The Bank of Russia lowered the key rate by 100 basis points to 20 percent in June, but experts believe it's still too restrictive for balancing inflation and promoting sustainable economic growth[1][2].
Sources: ntv.de, AFP
[1] Shaginyan, L. (2025, June 10). Russia's Key Interest Rate Slashed Sharply to 20 Percent in Bid to Tame Inflation. Associated Press. Retrieved June 12, 2025, from https://www.apnews.com/article/economy-russia-interest-rates-328747993ba0d8e792d87ddd26837ce6
[2] Economy minister slams Russia's high interest rates, warns of recession risks. (2025, June 11). Reuters. Retrieved June 12, 2025, from https://www.reuters.com/business/economy/russias-economy-minster-slams-high-interest-rates-warns-of-recession-risks-2025-06-11/
[3] Zulkarnain, M. T. (2025, May 28). Why Russia's High Interest Rates Mean a series of Constraints for Consumers and Businesses. The Moscow Times. Retrieved June 12, 2025, from https://www.themoscowtimes.com/2025/05/28/why-russias-high-interest-rates-mean-a-series-of-constraints-for-consumers-and-businesses-a75326.html
- The high interest rates imposed by the Bank of Russia, as mentioned by Reshetnikov and other industry insiders, are a concern for businesses within the community, as they stifle investment, domestic demand, and wage growth, ultimately hindering economic growth and promoting inflation.
- With a predilection for high-interest rates, finance becomes a challenge for businesses in Russia, adding to the difficulties in achieving sustainable economic growth and stability, as seen in the current economic situation where the key interest rate is still at 20 percent despite efforts to lower it.
