Vladimir Putin recently clashed with Russia’s top banker as the president scrambles to hide the extent of his suffering economy. German Gref, CEO of the country’s largest bank, Sberbank, warned that Russia’s GDP growth had slowed to almost zero in July and August following a steep decline between April and June.
He told the Eastern Economic Forum: “The second quarter can practically be considered technical stagnation.”
This sparked the anger of the Russian president, who insisted that the slump merely showed a “soft landing” as prices stablilse. He said: “Ask Gref. Has lending stopped? No. The pace has just slowed.”
This disagreement exposed the true cost of the war with Ukraine on the Russian economy, and the gap between the Kremlin and institutions, experts said.
Oleh Pendzin, economist and head of the Economic Discussion Club, suggested that Mr Gref is worried about potential accusations levelled against him by Russia’s Federal Security Service – the state security agency and main successor to the KGB.
He said: “Public discussion is the only way today for economists to convey this problem to Russia’s top leadership. You can see how cautiously Gref speaks, making sure it doesn’t turn into accusations against him from Russia’s Federal Security Service.”
This comes after the Bank of Russia cut its benchmark interest rate Friday by one percentage point to 17% as growth slows and spending on the war against Ukraine increases the budget deficit.
It previously raised its key rate as high as 21% to combat inflation, but has begun to retreat amid complaints from business leaders and legislators about their impact on economic activity.
“Inflation eased in July and August, but now remains at 8.2%. The central bank warned that “inflation expectations have not changed considerably in recent months”.
It said: “In general, they remain elevated. This may impede a sustainable slowdown in inflation.”
