Introduction to Russia’s Economic Situation
The Russian economy has entered a stage of "technical stagnation" in the second quarter of 2025, with July and August showing "symptoms that we are approaching zero growth." This statement was made by Herman Gref, the head of Sberbank, at the Eastern Economic Forum. He emphasized the need for a timely exit from the managed economic cooling and presented a clear forecast for the key rate.
Current Economic Conditions
According to the Central Bank’s latest estimates, annual inflation in 2025 will amount to 6–7%, reaching the target of 4% over the following three years. This has been made possible by a strict monetary policy, with the key rate being raised to 21% in 2024 and only reduced to 18% in June–July 2025. However, the economy shows signs of slowing, with GDP growth in 2025 expected at 1–2%, and by some estimates, only 0.6–1.2%.
Forecast for the Key Rate
Gref presented a forecast for the key rate, stating that it will be around 14% by the end of the year. However, he believes that this is insufficient for the economy to begin reviving, and that a rate of 12% or lower is needed. He also pointed to a specific condition for a recovery in lending: a reduction of the key rate by at least 200 basis points (2 percentage points), which would allow the credit portfolio to move to "sustainable growth" in the second half of the year.
Risks and Challenges
The Central Bank has developed four scenarios for the economy for 2026–2028, each of which assumes a different trajectory for the key rate. The baseline scenario assumes a key rate of 12–13% in 2026 and 7.5–8.5% in 2027–2028. However, there are risks and challenges associated with each scenario, including the possibility of a global financial crisis, tightening of sanctions, and declines in oil prices.
Alternative Development Scenarios
The four scenarios developed by the Central Bank include:
- Baseline scenario: assumes a key rate of 12–13% in 2026 and 7.5–8.5% in 2027–2028, with current sanctions maintained and gradual economic cooling.
- Disinflationary scenario: assumes a key rate of 10.5–11.5% in 2026 and 7.5–8.5% in 2027–2028, with active growth in investment and productivity.
- Pro-inflationary scenario: assumes a key rate of 14–16% in 2026 and 10.5–11.5% in 2027–2028, with tightening of sanctions and declines in oil prices.
- Risk scenario: assumes a key rate of 16–18% in 2026 and 18–20% in 2027, with a global financial crisis and sharp drops in oil prices.
Conclusion
In conclusion, the Russian economy is facing a complex situation, with a need to balance controlling inflation and supporting economic growth. The Central Bank’s ability to achieve target inflation levels will depend on its capacity to manage monetary policy amid ongoing external and internal uncertainty. As noted by Herman Gref, the regulator will need to find a balance between cutting the rate to stimulate the economy and managing the risks of accelerating inflation. The success of monetary policy will be determined by the Central Bank’s ability to maintain stability and ensure the stable anchoring of inflation near the target level of 4%.
