A stalling economy is not yet a collapse, but it is the clearest warning sign of one.
Moscow, September 2025.
Sberbank’s CEO, German Gref, issued a stark warning at a recent economic forum: Russia’s economy has entered technical stagnation. Official data confirm his assessment. Growth in the second quarter hovered close to zero, while preliminary figures from July and August suggest a further slowdown. The country’s monetary policy, with interest rates still fixed at 18 percent, has become a choke point. Lending remains restricted, private investment is paralyzed, and momentum has all but vanished. Gref added that even if the central bank lowers rates to 14 percent by the end of the year, this will not be enough to revive growth. According to him, only a rate closer to 12 percent would create the conditions for a genuine recovery.
The Finance Ministry projects overall growth for 2025 at just 1.5 percent, a sharp reduction from earlier expectations of nearly 2.5 percent. Economists warn that this trajectory may easily push Russia into recession if monetary stimulus is not applied soon. For households, stagnation translates into lower consumption, limited credit availability, and an erosion of real wages. For businesses, it means delayed investments, reduced hiring, and deeper vulnerability to external shocks.
President Vladimir Putin, however, has publicly rejected the term stagnation, insisting that the policies pursued are necessary to maintain inflation control. Yet his statements collide with the mounting evidence. Inflation remains elevated, fiscal pressures are growing, and GDP growth has decelerated markedly from the stronger rates registered in 2024. The official narrative of resilience is increasingly difficult to sustain as structural weaknesses resurface.
Russia’s war economy is clearly strained. Energy revenues, still the cornerstone of federal income, have fallen by nearly twenty percent compared with last year. At the same time, military spending continues to consume an ever larger share of the national budget, leaving less room for social programmes and infrastructure. Budget deficits have widened, forcing the government to resort to extraordinary financing methods. Industries outside the defense sector show clear signs of stress, with automotive, construction and technology facing shortages of imported inputs and difficulty adapting supply chains.
International sanctions have amplified the problem. Restrictions on technology transfers and capital flows have pushed Russia to rely on costlier intermediaries and barter-style arrangements. This has increased transaction costs and reduced efficiency, further eroding competitiveness. The Kremlin presents trade reorientation toward Asia as a success, but experts underline that these new routes often involve discounts, reduced margins and higher logistical costs.
Inside the country, ordinary citizens experience the stagnation in everyday life. Prices for food and utilities remain volatile, while wages have barely kept pace. Credit has become prohibitively expensive, limiting opportunities for small businesses and households alike. While employment levels appear stable, much of this stability is sustained by state programmes and military-related industries rather than organic private sector growth.
The political implications are significant. An economy caught between inflation control and weak growth narrows the government’s room to maneuver. The central bank fears that aggressive rate cuts could reignite inflationary spirals, while businesses and households demand relief. The Kremlin, caught between these pressures, risks losing credibility if promises of resilience continue to clash with deteriorating data.
What emerges is a picture of an economy caught in limbo. It is not in freefall, but it lacks the dynamism to grow meaningfully. The risk is that technical stagnation becomes chronic, eroding capacity for innovation and undermining long-term competitiveness. Russia’s policymakers face a narrow and precarious path: either they take steps to ease monetary conditions and risk higher inflation, or they maintain the current stance and condemn the economy to stagnation with the possibility of sliding into recession.
In the broader context, Russia’s stagnation also has geopolitical consequences. A weakened economy limits its capacity to sustain prolonged conflict, reduces its leverage in negotiations, and erodes its appeal as a partner for emerging economies. For now, Moscow continues to project strength, but beneath the surface the data suggest fragility. If stagnation persists, the costs will extend beyond economics, reshaping Russia’s role on the global stage.
Resistencia narrativa global.
Global narrative resilience.