Putin Warned of Dual Threat to Russian Economy: ‘Countdown to a Crisis’

Moscow’s economy is sliding toward the brink of “stagflation,” according to a new report published by a Russian economics research organization close to the country’s government.

The report’s author, Dmitry Belousov, head of analysis and forecasting of macroeconomic processes at the Center for Macroeconomic Analysis and Short-Term Forecasting (CAMAC), said that the “economic dynamics” in Russia are “rapidly declining, with a risk of a technical recession in the second and third quarters” of 2025.

Why It Matters

After the invasion of Ukraine, Russia’s economy has been seriously affected by sanctions imposed by Western countries trying to cripple its ability to finance the war, but it crucially avoided entering a recession. Now, however, the economy is facing a risky combination of factors—including rising prices, slowing growth and an acute labor shortage—that is threatening its stability and outlook.

In a sign that the Kremlin is aware of how fragile the country’s economic position currently is, Russia’s central bank cut its key interest rate to 20 percent on Friday, down from a two-decade high of 21 percent.

What To Know

According to the report released earlier this week and authored by Belousov, GDP growth in Russia slowed down to 1.4 percent in Q1 2025 compared to a year earlier. While inflation is slowing down, it remains very high, at 9.8 percent.

While slowing investments in machinery and equipment has played into this slowdown, Belousov said that it has been accelerated by “growing problems in construction,” with the number of new projects now declining, and falling consumer demand, especially when it comes to non-food products. According to the report, consumer spending has been stagnating since mid-2024.

The combination of rising inflation and stagnant economic growth could bring the Russian economy into a state of “stagflation,” which is usually also characterized by high unemployment. In Russia, according to official data, unemployment is currently low at 2.4 percent.

What Happens Next

Belousov presented a “countdown” to a potential crisis in Russia. The report said that a potential downturn of the Russian economy could unfold between Q2 and Q3 2025 as a slowdown in economic growth and falling consumer demand and as a weakening of the ruble between Q3 and Q4 2025.

This loss in value for the Russian currency would be caused by a dip in trade in the first half of the year and a growth in imports, Belousov said, taking into consideration the impact of President Donald Trump’s tariffs.

“It is easy to see that the ‘trigger’ of a new intensification of the crisis could be another step in tightening the interest rate policy of the Bank of Russia, provoked by the (almost inevitable) weakening of the ruble, an increase in administratively regulated tariffs and a corresponding jump in inflation,” Belousov wrote.

The analyst recommends that the country focuses on reducing inflation to avoid the worst possible scenario for the Russian economy, as well as on supporting “the entry of Russian products into all available external markets” and stimulating investments in fixed capital.

What People Are Saying

The Central Bank of the Russian Federation said in a statement explaining its decision on Friday: “Domestic demand continues to outstrip the economy’s capacity to expand the supply of goods and services, but Russia is gradually returning to a more balanced growth path.”

Russia’s central bank’s Governor Elvira Nabiullina said in a press conference on Friday: “We are close to a scenario of balanced economic growth.” According to Nabiullina, “monetary policy will remain tight for a long period.”

She added: “Inflation ultimately eats away at the economy’s potential, so our goal is to curb inflation and allow the real sector of the economy to develop.”