Russia's economy plunges into technical stagnation, according to the head of its largest banking institution

Russia's economy plunges into technical stagnation, according to the head of its largest banking institution

Russia's economy has entered a stage of "technical stagnation" in the second quarter of this year, according to recent reports. Amidst this economic slump, the question of whether the Central Bank president will approve a significant cut in the key interest rate to spur economic recovery remains unclear.

Sberbank, Russia's largest lender, has been vocal about the need for such a move. Sberbank's CEO, German Gref, believes that a key interest rate of 12% or lower is essential for the country's economic revival. He stated that July and August show symptoms indicating the economy is approaching zero marks, emphasising the urgency of the situation.

In a recent statement, Gref predicted that the Russian economy might revive once the key interest rate reaches 12% or lower. However, he also acknowledged that the current rate of 14%, as estimated by Sberbank, may not be enough to revive the economy.

Gref further emphasised that the real interest rate, rather than the nominal one, is what truly matters, and in Russia, it is currently among the highest in the world. He believes that a significant reduction of the key interest rate is needed for the Russian economy to recover.

Sberbank also predicts that the loan portfolio may shift to sustainable growth in the second half of 2025 if the Central Bank reduces the rate by at least 200 basis points (2 percentage points). This could potentially pave the way for a much-needed economic revival.

However, it's important to note that the name of the Central Bank president who must approve this cut in the key interest rate is not explicitly mentioned in the provided search results. This leaves the future of Russia's economic recovery uncertain, as it depends on the decision of the Central Bank.

Despite these challenges, Gref remains optimistic. He believes that with the right measures in place, Russia can overcome its economic struggles and move towards a brighter future. The key, he says, is in the hands of the Central Bank.

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