Putin aide releases caution regarding Russian economy

(MENAFN) Russia’s economy is beginning to show signs of strain, and immediate action is needed to loosen monetary policy to prevent further decline, according to a senior Kremlin adviser.

Boris Titov, President Vladimir Putin’s envoy for international organizations on sustainability issues, raised concerns on Monday while commenting on a recent report from the Russian Academy of Sciences’ economic forecasting institute. The survey, conducted this spring, highlighted worrying trends among industrial and infrastructure firms.

Titov noted that the findings, while not unexpected, are troubling. He pointed to a sharp decline in investment activity, with fewer than half of businesses currently investing, down from 64% a year ago. Only 35% of companies plan to launch new production projects, compared to 50% previously. Access to credit is worsening too, with just 32.5% of firms considering loans affordable, down from nearly 40%. Meanwhile, the number of companies investing without borrowing has nearly doubled, and more are reporting concerns about declining domestic demand.

“If conditions remain the same, these problems will only deepen,” Titov warned on Telegram, stressing the urgent need for monetary policy easing. He argued that sectors beyond defense require cheaper credit to sustain growth, which he said is now driven mostly by past momentum.

Although Russia has faced harsh Western sanctions since the escalation of the Ukraine conflict in 2022, its economy has outperformed expectations, growing by 4.1% in 2023 and 4.3% in 2024. Russia is currently ranked the world’s fourth-largest economy by purchasing power parity (PPP).

The Bank of Russia lowered its key interest rate by 100 basis points to 20% in June, citing easing inflation — the first reduction since 2022. However, last month, Economic Development Minister Maksim Reshetnikov warned that growth may be slowing and depends heavily on policies, particularly interest rates.

The central bank expects Russia’s GDP growth to slow to 1-2% in 2025, while the government is forecasting a slightly higher 2.5%.

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