The key to growth: what will happen to the Russian economy in 2025
The Russian economy will grow by 1.5% in 2025. Such a scenario will be possible if the Bank of Russia moves to lower the key interest rate. This is reported by the rating agency "Expert RA". The economic expectations described in the macro forecast give grounds for moderate optimism, analysts say. However, the rate may remain at the same level if the Central Bank sees an increase in inflation expectations or a jump in imports. Izvestia tells us what will happen to the Russian economy this year.
Scenarios for the development of the situation
By the spring of this year, the Russian economy was at an inflection point — the growth rate slowed down, credit activity and the acute shortage of personnel decreased, and overheating gradually subsided. This is stated in the macro forecast for 2025, presented by the rating agency "Expert RA".
External factors may contribute to the cooling of the economy. In previous years, due to the risks of a global trade war, uncoordinated actions by major central banks, and problems in the economies of the eurozone and China, the external economic environment began to look less favorable. The stability of the fiscal and monetary policies of the world's key economies has been threatened by increased military spending, which increases the risk of a new inflationary wave.
Despite this, inflation in Russia may slow down to 6.5% by the end of the year, which is more optimistic than the Central Bank's forecast and inflation expectations. According to Expert RA, annual inflation will show a sharp decline in April-May of this year. It will be reinforced by the base effect of the inflationary wave of 2024. However, the current pace will decrease gradually, and this process may still temporarily unfold in the middle of the year amid rising tariffs.
The rate and trajectory of decreasing price growth will determine the policy of the Central Bank. The choice of the scenario that the regulator will make will depend on the success of its efforts to cool the economy and prevent a recession.
According to the agency's experts, there are two scenarios for the development of the situation. The first one assumes a "soft landing" — the rates in this case will be 18-19% by the end of the year. In the first half of 2026, inflation will return to the target, which will allow the key rate to be set at at least 10% by early 2027. In this case, by the end of the year, GDP will increase by about 1.5%.
With a stronger slowdown in the economy and a partial easing of sanctions, a sharp easing of the PREP is also possible. In this case, the key rate will drop to 16% this year, and inflation will be at 6%.
The continued level of inflation expectations (about 13%), however, may hinder the projected mitigation. The price increase itself will have an impact on this. The Central Bank has repeatedly noted that the rate will remain high until inflation slows sharply and significantly.
In this case, the second scenario is more likely to be implemented, providing for an "additional shock" to the economy. Among the prerequisites for strengthening the rigidity of the PREP, experts single out the restoration of credit momentum and an increase in government spending. They can serve as a reason for the regulator to continue freezing.
The economic slowdown in this scenario will peak by the middle of the year. At the same time, the rate will remain at 21% until the December meeting. In this scenario, GDP growth will fall to almost zero, and in budget-priority sectors it will turn out to be negative altogether.
By the way, the budget situation has nothing to worry about anyway. In both scenarios, the sectors of the economy that are somehow related to budget financing will remain protected from recession due to government support.
Changed conditions
The tightening of the PREP observed in recent years was provoked by radically changed external and internal economic conditions, as well as rising inflation expectations, says Ilona Tregub, Doctor of Economics, Professor of the Department of Business Informatics at the Faculty of IT and Big Data Analysis at the Financial University under the Government of the Russian Federation. The Bank of Russia reacted to the surge in inflation by raising its key interest rate to record levels.
— It is worth noting that these measures were countercyclical in nature, aiming to find a balance between recessions and overheating of the economy, — says the interlocutor of Izvestia.
According to Tregub, there is a linear relationship between the current inflation rate and the key rate values with a delay of three months. However, rising prices do not have a direct impact on demand and ultimately on the country's gross domestic product.
All this suggests that further economic recovery in the short term will be supported by increasing consumer demand, which will lead to a resumption of credit growth for individuals and an outflow of funds from deposits, the economist points out.
An optimistic forecast
The economic expectations described in the macro forecast give grounds for moderate optimism, said Alexei Govyrin, a member of the State Duma Committee on Small and Medium-sized Enterprises.
"The scenario of economic growth of 1.5% in the absence of a further increase in the key rate looks realistic, given the signs of cooling activity and slowing inflation that have already appeared," he believes.
The Central Bank's switch from tightening the PREP to maintaining the current rate level, coupled with a slowdown in price growth, according to the parliamentarian, may create conditions for more confident behavior of businesses and the public. Even maintaining the rate until the end of the year will not be a serious obstacle to economic growth, as the market has adapted to tight monetary policy.
But it is important to understand that in many ways the "soft landing" scenario will be realistic if current conditions persist, says Inna Litvinenko, PhD in Economics, Associate Professor at the Russian State University of Social Technologies. Among them, she highlights the state of economic activity, as well as the volume of loans and deposits.
External conditions will also play a role, primarily related to the relationships of key players on the world stage.
"However, even if tariff relations are not yet stabilized, they will not be accompanied by severe fluctuations," the expert predicts.
Under these conditions, the main task of the Russian government and the Central Bank is to maintain a state of smooth economic activity, preventing overheating, Litvinenko is convinced.
— It is important to slow down inflation and the refinancing rate. In this case, as early as 2026, it will be possible to talk about a level below 15% and even, possibly, 12%," predicts the economist.
An additional shock
At the same time, Russia may be affected by a new wave of inflation in the world, triggered by trade wars and pressure on commodity markets, Ilona Tregub believes.
— In addition, sanctions pressure, currency restrictions and the risk of external shocks remain. We are in a state of high uncertainty, and if the Central Bank sees an increase in inflation expectations or a jump in imports, the rate may remain at 21% or even rise higher, the economist predicts.
In the case of the second scenario, which assumes that the rate remains unchanged, the indicator may remain at 21% until the second meeting of the Central Bank's board of Directors in 2026, Inna Litvinenko agrees.
— This scenario is realistic if the unfreezing of the credit market and economic activity in the Russian market are allowed due to the injection of additional funds into investment projects. However, in conditions of an increased refinancing rate, this is unlikely to be possible, the expert believes.
Alexey Govyrin does not exclude the possibility of a scenario with an "additional shock", but sees it as less preferable.
"Current trends — lower inflation rates, fading credit momentum, more cautious fiscal behavior — speak more in favor of a soft trajectory rather than new drastic decisions," the deputy points out.
Budget sustainability
The expected economic growth of 1.5% will have a supportive effect on domestic demand, especially in segments that depend on government spending, Alexey Govyrin is convinced. It will turn out to be slow but steady, which will allow the business to make plans for a longer term.
At the same time, economic growth may drop to 1.6–1.8%, predicts Inna Litvinenko. And this situation will primarily affect salaries and other payments. It will also help strengthen the ruble.
The budget of the Russian Federation is unlikely to decrease sharply in the coming months, Ilona Tregub points out. However, its sustainability may be questioned if external circumstances worsen and export earnings decrease. Government debt servicing rates remain high, and the Ministry of Finance has less and less room for maneuver.
It is important to take into account that the current budget deficit is 4.4 trillion rubles, the economist emphasizes. The authorities want to reduce it to 1.6 trillion rubles.
— In the conditions of a tough labor market and moderate economic growth, it is more likely to expect an increase in the budget deficit exceeding the planned values. Mitigation of the PREP and a course towards stabilizing the geopolitical situation will not be able to ensure the necessary economic growth rate to narrow the deficit due to the inertia of the effects, the expert warns.
The reduction in revenue receipts to the budget will affect investments in large industrial projects and the implementation of national projects, Litvinenko believes. In particular, there may be a reduction in funding for the military-industrial complex, since sufficient investments have been recorded in the last two years.
— In addition, movement is expected towards the settlement of the Ukrainian conflict, which will also have an impact, — the interlocutor of Izvestia expects. At the same time, payments related to the support of ITS participants will remain at the same level.
Nevertheless, the budget situation, judging by the current parameters, remains good, Govyrin believes.
"The deficit is limited, incomes are growing, including due to tax innovations, and expenses are allocated based on priorities,— the parliamentarian summarizes.
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