Invest Foresight asked for insights from Doctor of Economics and Professor Nikita Krichevsky on the economic highlights of 2024 and Russia’s prospects for 2025.

– 2024 can be split into two distinct halves. The first half was relatively positive and filled with optimism. However, the second half saw the emergence of some ‘uncertainties.’ These uncertainties are tied to various factors, with the Central Bank’s key rate being far from the most significant among them.
All of a sudden, there was a shortage of budget funds. Mortgage programs were abruptly reduced, except for families, with a cap of 12 million for large cities. By year’s end, banks faced a liquidity crunch, leading to a halt in loan issuance. Discussions arose about several sectors of the economy being on the brink of bankruptcy, although this claim is not accurate.
Regarding the key interest rate, it is not the central focus of the plan; rather, the rate serves as a tool. This tool, as I understand it, is intended to extract surpluses that were accumulated and saved in previous years. While many are lamenting that there is no money for investments, the truth is that the funds are there; the issue lies in entrepreneurs being reluctant to reinvest them.
Construction activity began to stall, and inflation surged significantly, something that cannot be curbed solely through interest rate adjustments, as the causes are non-monetary. Consider the factors driving this: hikes in housing and utility tariffs, increased Gazprom rates, higher recycling fees, and, starting December 1, elevated railway transportation costs – all of these combined.
As a result, the second half of the year has brought back negative associations. While the first half was marked by positive developments, the second half has seen a noticeable downturn.
Plus, baseless rumors have emerged suggesting that banks may struggle to meet depositors’ demands smoothly. This is a significant concern, and it’s evident that the banking market will undergo consolidation in the coming year. Currently, about 20% of credit institutions are operating at a loss. These are the ones most likely to either exit the market or, where feasible, merge with larger entities to form larger structures.
Let’s also keep in mind the efforts to curb inflation toward the end of the year. It’s better not to unsettle people in the final days of the year; let’s leave things as they are and start fresh from January 1, allowing the situation to reset.
Looking ahead to 2025, I don’t see overly optimistic prospects. Based on year-end survey results, we observe that only 28% of companies are investing in production development. Meanwhile, 63% of businesses are focused on increasing employee wages.
Prices are beginning to rise uncontrollably across a wide range of goods. Any notion of effective price fixing is largely illusory. Take, for instance, the attempt to regulate potato prices, which applied only to unwashed potatoes in 25-kilogram sacks, with a size range of 5-8 centimeters in diameter, essentially unmarketable. These potatoes are either too small to be practical or packaged in quantities that are inconvenient for transport, as most buyers prefer sacks of no more than 10 kilograms.
The situation in the banking industry is set to deteriorate, with prices expected to rise substantially compared to 2024. Inflation is already on the rise, and nearly all manufacturers are warning wholesalers and retail chains about upcoming price increases starting January 1.
Although the general situation appears to be under control, it looks alarming. The consumer import substitution policy has evidently failed. The conditions in agriculture are far from satisfactory: just consider the prices of staple foods such as potatoes, butter, and eggs, which have stabilized only through price increases.
All would be fine if it weren’t for unpredictable ‘black swan’ events that can emerge at the most inconvenient times and come from various sources, as it was when the monetization of benefits was announced in 2005. Although it seemed manageable, it led to people blocking the federal highway in Khimki, resulting to the measures taken to increase the basic pension and additional benefits, among others.
We have no reason to be concerned about black swans emerging from outside. Due to the presidential military rearmament program, we now stand as a fully independent sovereign nation. As regards economic management, the economic strategies we set up last year will fully demonstrate their effectiveness in 2025.
They say that we just need to be patient for a few months or a quarter, and we will do so. With rising tariffs and ongoing personnel shortages, we will ultimately see increased prices; entrepreneurs are aware of this reality and have limited options to offset costs. They are open to discussions about freezing prices and other measures, provided their profit margins remain intact.
What will this lead to? Actually, we can already see the apparent effects. We see tensions rise, and while it may not be strongly felt in Moscow, it is far more pronounced in St. Petersburg, where prices are less regulated.
As much as we would like to see [internal] positive developments, all the positive news will come from the external fronts. While this is crucial for the country and its citizens, issues remain on the economic front, which is clearly evident.
The situation is disturbing and alarming, and it is likely to deteriorate further. Yet, we absolutely cannot compare it with the events observed in the 1990s; no price caps or freezes are taking place now. So, in general, we are looking to the future with optimism, and it’s essential to understand that family is paramount in our society. Our quality of life depends on the happiness of our family and loved ones; this is because in Russia, a family or household, rather than an individual, serves as the unit of society. That is where our resilience lies and where we will continue to thrive. And our families remain strong despite divorce rate and the declining birth rate, largely because of who we are as a nation.