Faith, love, intuition and stubbornness – the whole gamut of feelings of government members in the face of the threat of recession at the SPIEF sessions

The feeling of an imminent recession in the Russian economy was in the air all the days of the St. Petersburg International Economic Forum 2025. Even the country's president, Vladimir Putin, noticed this, demanding in his speech that "it should not be allowed under any circumstances." However, the government does not yet have a common understanding of how to do this, against the backdrop of rising inflation, the Central Bank's overstated key rate of 20%, reduced investment, and depleted resources.

Throughout the St. Petersburg forum, officials from the economic bloc resembled employees of the Hydrometeorological Center, predicting either overheating of the economy or its cooling. The arguments in these forecasts were based not on statistics and calculations, but on some special economic sensibility: faith in curbing inflation, the Central Bank's intuition, and love for the economy.

It is not surprising that, as a result, the three main managers of the government's economic block: Finance Minister Anton Siluanov, Economic Development Minister Maxim Reshetnikov and the head of the Central Bank Elvira Nabiullina, finding themselves at the same session, entered into a heated public debate between themselves and the moderator of the panel, Chairman of the State Duma Committee on Budget and Taxes Andrei Makarov.

The head of the Central Bank Elvira Nabiullina optimistically called the current state of affairs "coming out of overheating." "Our demand economy was growing, but the supply economy was lagging. That's where the overheating and inflation come from. In other words, we are now coming out of overheating," she said.

The Minister of Finance corrected her: "We are now experiencing, I would say, a cold snap." However, deciding not to exaggerate, he added, "but after a cold snap comes summer." "The task of the Ministry of Finance is to make the budget such that spring comes faster after our frosts," added A. Siluanov.

Maksim Reshetnikov clearly did not share the optimism of the Finance Ministry and the Central Bank. "According to the figures, we have a cooling. But for us, all our figures are a rear-view mirror. According to the current feelings of business, we already seem to be on the verge of a recession," the head of the Ministry of Economic Development stated gloomily.

According to him, enterprises are not very willing to invest in the context of a tight monetary policy. The growth of investments by 8.7% in the first quarter, which A. Siluanov pointed out, the head of the Ministry of Economic Development called the "warm winter effect" and the completion of investment projects on the terms of lending available in previous years. In general, by the end of the year, investments will increase by only 1.7%, compared to 2024, which means an outflow of capital in the third and fourth quarters, the head of the Ministry of Economic Development warned.

At the current Central Bank rate, businesses, instead of investing in development, prefer to keep money on deposits. "We see a fairly large influx of funds into deposits, including legal entities. We understand that the current level of interest rates demotivates not only to enter into new projects with credit resources, it seriously demotivates to invest their own funds there," the minister sternly argued.

M. Reshetnikov's tough position coincided with the opinion of business. As Sber CEO German Gref noted, speaking at the SPIEF-2025 business breakfast, the inflated Central Bank rate will become a serious threat to economic growth in the next 2-3 years.

"We are faced with a large set of problems. First of all, the very high Central Bank rate in real terms. The difference between the current inflation and the Central Bank rate fluctuates between 10 and 14%. This puts a lot of pressure on business profitability. Businesses are changing their plans, unfortunately, postponing investments. This obviously poses a threat to economic growth not only in the current year, but most importantly – in the next two or three years," said German Gref.

Gazprom Neft CEO Alexander Dyukov noted that the rate puts pressure not only on big business, but also on their partners, including those participating in oil companies’ technological investment programs.

However, the head of the Central Bank, Elvira Nabiullina, steadfastly held the line, and defended the key rate of 20% throughout the forum, admitting that in achieving the goal of reducing the rate of inflation to 4%, she was driven by intuition and stubbornness.

"The inflation forecast is a calculation backed by the determination to achieve a reduction in inflation to the target of 4%. Some may call this the stubbornness of the Central Bank, me, or persistence - this is a more accurate word. At the same time, no one has cancelled intuition," said Elvira Nabiullina, head of the Central Bank, at the same session.

At the same time, the heads of the Ministry of Finance and the Central Bank, unlike the Minister of Economic Development, did not see a big tragedy in the decline in investment rates. From the point of view of E. Nabiullina and A. Siluanov, the decline in investment is a temporary phenomenon against the backdrop of a planned cooling of the economy, undertaken for the most important goal - reducing the inflation rate to 4%. "Inflation is important," E. Nabiullina insisted throughout the SPIEF.

True, the head of the Central Bank herself admitted at the forum that all financial resources in Russia have been exhausted, and now the departments are faced with the task of actually coming up with a new economic model that is adequate to modern realities and restrictions.

"We have been growing at a fairly high rate for two years due to the fact that free resources were used. This includes production capacity, import substitution, as well as the accumulated resources of the National Welfare Fund budget, which was spent on investments, and the capital reserve of the banking system, which was the basis for accelerated lending. Many of these resources have indeed been exhausted. We need to think about a new growth model," the head of the Central Bank suggested.

And most importantly, the key resource for the development of the domestic market has been exhausted – cheap energy, M. Reshetnikov added some gloomy colors for his part.

"The situation in the energy sector is changing, we are rapidly moving from energy surplus to energy deficit. This requires large financial resources and intensifies the dispute over who will pay for them," he said at SPIEF-2025.

But the heads of departments have not proposed any new financial models. According to E. Nibiullina, the only thing the Central Bank can give is a gradual reduction of the rate to an acceptable level, at which inflation will become controllable and the investment climate attractive.

The main thing here is to believe. To believe in the feasibility of government decisions, in reducing inflation, in improving the economy. “The key rate is based on the quality of institutions and trust. If people are confident that the authorities promise to reduce inflation and are working towards it, the rate will be lower,” she is convinced.

"The main thing is faith. If you believe in 4% inflation, it will definitely come true. Inflation expectations also play a significant role. The persistence of the Central Bank, supported by the budget effect, is also important," the head of the Ministry of Finance echoed her, promising to draw up the budget in such a way as to ensure reaching these enchanted 4%.

M. Reshetnikov has always tried to give the discussion about the state of affairs in the Russian economy, the rate and inflation a more rational justification, recalling the need to increase housing and communal services tariffs, government measures to protect the domestic market, institutional reforms for a quick start of the supply economy, etc.

But in the end he gave in, acknowledged the miracles of the Central Bank rate and started talking about love. "We have achieved more success in the fight against inflation than the Central Bank says, in April-May we had a steady inflation growth of 5%, and in two weeks of June - 2%. But in addition to faith in inflation at 4%, at least a little love for the economy is needed. The economy and its structural changes are not only a reduction in the rate ...", - the minister summed up.