Russia’s economy could be ‘on the verge’ of a recession, according to one of the top officials in Vladimir Putin’s Kremlin – Russia’s economy remains on a war footing
Vladimir Putin received a stark warning from one of his own ministers as Russia’s economy remains on a war footing. The Russian Economy Minister Maxim Reshetnikov said that Russia’s economy is ‘on the verge’ of transitioning to a recession.
“We have a cooling stage,” Reshetnikov said at the St. Petersburg International Economic Forum, calling the numbers bedding his comments like looking at a “rearview mirror”. He said: “According to current business perceptions, we are already, it seems, on the verge of a transition to a recession.”
Reshetnikov said that a recession was not inevitable and would depend on decisions taken by the Kremlin. Putin, in a speech at the forum, mentioned the recession warnings but emphasised that “it mustn’t be allowed”.
Putin said Russia has managed to curb inflation and ease its reliance on energy exports. He pointed out that manufacturing industries have posted steady growth, allowing the country to reduce its reliance on oil and gas exports.
“The perception of Russian economy as based on raw materials and dependent on hydrocarbons exports have clearly become outdated,” Putin said, adding that the economy grew by 1.5 percent in the first four months of 2025 and inflation has dropped from double digits to 9.6 percent.
Putin has used the annual forum to highlight Russia’s economic prowess and encourage foreign investment, but Western executives have shunned it after Moscow sent troops into Ukraine in 2022, leaving it to business leaders from Asia, Africa and Latin America. The economy, hit with a slew of Western sanctions, has so far outperformed predictions.
High defence spending has propelled growth and kept unemployment low despite fuelling inflation. Large recruiting bonuses for military enlistees and death benefits for those killed in Ukraine also have put more income into the country’s poorer regions. But over the long term, inflation and a lack of foreign investments pose threats to the economy.
Economists have warned of mounting pressure on the economy and the likelihood it would stagnate due to lack of investment in sectors other than the military. Putin said the growth of military industries helped develop new technologies that have become available to the civilian sector.
He vowed to continue military modernisation, relying on lessons learned during the fighting in Ukraine. “We will raise the capability of the Russian armed forces, modernize military infrastructure and equip the troops with cutting-edge equipment,” Putin said.
But Russian Central Bank Governor Elvira Nabiullina said that the factors that had helped Russia with sustained growth could no longer be relied upon. On June 19, The Moscow Times said that Nabiullina said Russia had been growing on the back of “free resources”.
This includes its bank reserves, liquid assets in the country’s wealth fund, industry and labour. Such resources are now reaching their limit, Nabiullina said.
“We grew for two years at a fairly high pace because free resources were activated,” she said. “We need to understand that many of those resources have truly been exhausted.”