Russia’s Ministry of Economic Development has prepared a conservative macroeconomic forecast up to 2027, which takes into account the potential for stronger sanctions, falling raw material prices, and negative demographic trends. The ministry noted that developing such scenarios is part of standard procedure.
This conservative forecast outlines several possible adverse factors, including a global economic slowdown, increased sanctions pressure (including the risk of secondary sanctions against allied nations), a reduction in the workforce, and a tightening of monetary policy by the Bank of Russia. It concludes that such factor combination may result in a cooling economy scenario in 2025.
Cooling may occur when economic growth slows down more than expected, Artem Deyev, head of the analytical department at AMarkets, explains.
“For instance, as data shows, Russia’s GDP is already indicating a slowdown, which raises concerns regarding a possible economic recession. We should also keep in mind that geopolitical uncertainty, sanctions and tense relations with other countries may negatively affect the economy and lead to cooling as well,” the expert emphasizes.
The current forecast presented by the Ministry of Economic Development suggests that the GDP growth rate may amount to 1.7% in 2025, which is lower than the potential growth rate of 2.5-3%. This indicates a negative output gap, meaning that actual output is less than what an economy could produce at full capacity, which typically leads to a decline in overall economic activity. Yet, the government’s efforts aimed to stimulate the economy, such as through infrastructure projects or tax breaks, could help avoid cooling.
“Therefore, the possibility of the Russian economy cooling does exist, particularly given the current data and factors. This could result in deteriorating inflation and GDP growth outlook,” Artem Deyev concludes.