Russian Economy on the Brink: Interest Rates and Stagnation Fears

Sberbank CEO German Gref warned that unless Russia's central bank significantly cuts interest rates, the economy could stagnate. The current high rates, a response to inflation driven by military spending, have stymied economic growth. Pressure mounts on the central bank to lower rates to avert recession.

Sberbank's CEO German Gref has issued a stark warning about the Russian economy, suggesting it might stagnate without a cut in interest rates by the central bank. Despite the economy previously growing at 4.1% in 2023, growth is sharply slowing under persistent high rates.

Russia's military expenditure, the highest since the Cold War, has led to inflation, prompting the central bank to raise its interest rate to 21% in October. Despite reductions to 18% in July, officials remain cautious about the economy's heavily restricted credit conditions.

At the Eastern Economic Forum, Gref noted that growth was nearly stagnant, emphasizing that a reduction to 12% could spark recovery. Officials, including Finance Minister Siluanov, warn of slowed economic growth, urging the central bank to reassess rates in September to counteract the recession threat.

(With inputs from agencies.)