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- Winter in summer: what is the danger of hypothermia of the economy for Russians and businesses
Winter in summer: what is the danger of hypothermia of the economy for Russians and businesses
The Russian economy may face the risk of hypothermia. Maxim Reshetnikov, the head of the Ministry of Economic Development, warned about this. At the same time, inflation is gradually slowing down, which will require timely decisions by the Bank of Russia on monetary policy. The high key rate significantly limits the availability of credit resources for businesses, especially for small and medium-sized enterprises, experts say. The minister's statement can be regarded as an appeal to the Central Bank to take into account the already achieved results of the fight against inflation in further determining the parameters of the PREP. What is the danger of hypothermia in the economy — in the material of Izvestia.
The likely outcome
The current situation in the economy indicates the risk of hypothermia. This was stated by Maxim Reshetnikov, Minister of Economic Development of the Russian Federation, at a meeting of the Budget and Taxes Committee in the State Duma.
He believes that the forecast for inflation in Russia for 2025, assuming it to be at 7.6%, is realistic. However, it takes more account of the accumulated potential of the end of 2024 and the beginning of 2025.
"We have reflected the accumulated inflationary potential that developed in the fourth quarter and at the beginning of this year, which allows us to assess the current forecast," Interfax quoted the head of the Ministry of Economic Development as saying.
In recent weeks, as Reshetnikov notes, inflation, when shifting data to an annual regime, has been in the range of 3-4%. The Agency expects that the Central Bank will take this situation into account when making decisions on PREP.
By the way, Reshetnikov began warning about the risks of hypothermia in the economy back in October last year. Then he explained the situation by the reorientation of trade to friendly countries.
The head of the department pointed out a similar possibility in February of this year. He drew attention to the results of November-December, signaling that economic growth "has ceased to be frontal." The pace slowed down in the food and chemical industries, woodworking and certain branches of engineering.
The editorial board of Izvestia sent a request to the Ministry of Economic Development of the Russian Federation. No response has been received at the time of publication.
Soft landing
The dynamics of inflation in Russia has finally begun to show a slowdown. The central bank noted in its press release that annual inflation, as estimated on June 2, slowed to 9.8%.
Weekly inflation in Russia in the period from May 27 to June 2 slowed to 0.05% after 0.06% recorded from May 20 to May 26. This is evidenced by Rosstat data. Since the beginning of the month, the price increase by June 2 was 0.01%, and since the beginning of the year — 3.39%.
The data from the Ministry of Economic Development, in turn, indicates that in annual terms, inflation in the specified period was 9.66%. Prices have increased by 3.39% since the beginning of the year.
However, Russians' inflation expectations rose to 13.4% in May. In April, they amounted to 13.1%, according to a study by inFOM, commissioned by the Central Bank.
Vladimir Putin had previously stated that 2025 would be a "soft landing" for the Russian economy. This, as the Russian president expects, will allow the Central Bank to lower the key rate. At the same time, he pointed out the need to "squeeze" inflation so as "not to freeze the economy itself."
So far, the key rate is at 20%. On June 6, the Bank of Russia lowered its value by one point.
Dangerous situation
Maxim Reshetnikov's statement about the possible hypothermia of the economy deserves serious attention, says Nadezhda Kapustina, professor at the Department of Economic Security and Risk Management at the Financial University under the Government of the Russian Federation.
— The tight monetary policy pursued by the regulator is gradually leading to a decrease in business activity. The high key rate significantly limits the availability of credit resources for businesses, especially for small and medium—sized enterprises," she points out.
Economic hypothermia usually occurs when aggregate demand is unable to maintain a set growth rate, and borrowing costs become too high for businesses and households, says Alexei Govyrin, a member of the State Duma Committee on Small and Medium-sized Enterprises.
Hypothermia is also usually characterized by a slowdown in growth or a decrease in prices, a decrease in investment activity and a reduction in income and profits, adds Evgeny Plaksenkov, professor at the Moscow School of Management Skolkovo.
One of the key reasons for this situation, according to the expert, is the "human factor" — there is an imbalance with supplies, disruption of production processes, limited financing and maladaptive management systems.
In addition, the slowdown in global economic growth, the lack of external investment due to sanctions, market glut and negative demographic trends in the labor market lead to hypothermia, Kapustina said.
The consequences could be very sensitive for the economy, she warns.
— A slowdown in GDP growth, a drop in domestic production and budget revenues will be the inevitable result of prolonged restrictive policies. As a result, the labor market will react with rising unemployment and stagnating real incomes," the economist predicts. At the same time, many enterprises will face the problem of insufficient capacity utilization.
The budget system, in turn, will experience a decrease in tax revenues, which may lead to a reduction in funding for social programs. And the technological lag behind developed countries risks increasing due to insufficient renewal of fixed assets, the expert draws attention.
Total freezing
The cooling of the economy affects business in about the same way as hypothermia affects humans, Evgeny Plaksenkov is convinced. There are three stages of this condition — depression, stupor and coma.
According to Izvestia's interlocutor, the domestic business spent the entire year 2024 at the first stage.
— Not all companies have managed to preserve their key assets, avoid increasing debt levels and ensure profitable growth. Only the most experienced sold burdensome assets, strengthened key competencies, increased liquidity, and strengthened their competitive position," the expert points out.
The second stage, characterized by a "stupor," began in early 2025, Plaksenkov points out. The business began to try to maintain profitability at all costs, which led to a reduction in investments and the sale of assets. Such cooling can cause serious damage to the economy and society.
The third stage is quite dangerous, because it is quite difficult to open a business in a state of hypothermia, the expert emphasizes.
— If we have allowed the business to hypothermia, then its "reanimation" will require a complete transformation. It will be necessary to put in order the management system, asset portfolio, cost structure, processes and business models. We will need to find new sources of financing and income," he said.
However, Russian entrepreneurs have already become accustomed to both an overheated and a chilled economy, Plaksenkov believes.
"Our tremendous experience and invaluable human capital, together with the world's highest natural potential in the form of minerals, recently estimated at $100 trillion, will help restore economic growth," the source believes.
The best solution in times of crisis would be to focus on training and developing people, which, according to his forecast, will bring the economy to a new level next year.
Signal to the controller
A positive moment in the case of a cooling economy can only be a decrease in the rate of inflationary processes, Nadezhda Kapustina believes. The weekly data, which fall within the range indicated by the minister, clearly show a slowdown in price growth, which indicates the effectiveness of the measures taken earlier to tighten monetary policy.
In addition to a decrease in consumer demand, the strengthening of the ruble contributed to a decrease in inflationary pressure, which led to cheaper imports. A further slowdown in inflation is possible, but excessively low rates of price growth may signal serious problems in the economy, admits the Izvestia interlocutor.
The consequences can be multidirectional, Alexey Govyrin believes. On the one hand, inflation is really slowing down. But on the other hand, the risks of stagnation are becoming more tangible.
Reshetnikov's statement can be regarded as an appeal to the Bank of Russia to take into account the results already achieved in combating inflation when further determining the parameters of monetary policy, the parliamentarian notes.
Against this background, the Central Bank revised its approach to the key rate and began to gradually reduce it at a recent meeting, Kapustina expects. In the future, decisions will be made by the regulator taking into account a wide range of macroeconomic indicators, including the dynamics of consumer demand, investment activity and the balance of payments.
— Pointing out the risks of hypothermia is not a criticism, but an attempt to maintain a balance. And in this context, the position of the Ministry of Economic Development looks balanced and reflects an understanding of the current macroeconomic realities," concludes Govyrin.
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