Russia’s economy stands on the brink of recession, according to the latest financial data. Businesses across the country have been hit by high interest rates, which stand at a recent record high of 21%.
Many firms with high debt levels face an existential fight, as they struggle to pay back their bank loans. In April, Russia’s Central Bank chose to maintain interest rates at their present level, despite pleas from the Kremlin to loosen monetary policy.
The bank hiked rates last autumn, as it sought to control spiralling inflation that in April had reached 10.3%.
The double whammy of high inflation and interest rates is having a chilling effect on Russia’s overall economy.
New economic data shows Russia is on the brink of a recession, according to experts.
Alexander Kolyandr, a nonresident senior fellow at the Center for European Policy Analysis, said the economy could dip into recession within weeks.
“The Russian economy, which as recently as the end of last year was showing annual growth of 4.5%, faces not just a slowdown, but a likely recession,” he said.
“The latest official data suggests the economy could dip into negative growth as early as this summer.”
He noted that manufacturing industries – including those in the defence sector – were losing momentum.
Writing in the independent Russian publication The Bell, he noted: “In chemical production growth stalls, but the explosives’ share of the total climbs.
“In finished metals production, which includes most of arms and ammunition, the picture is similar.”
Meanwhile, as corporate borrowers are struggling to service their debt and more households accumulate bad loans, Rosstat said last week that growth in the first quarter of 2025 was only 1.4 percent.
This is three times less than 4.5 percent in the final quarter of 2024 and almost four times less than 5.4 percent for the same period last year.