Recession or "soft landing": the economy is struggling with recession
Russian Minister of Economic Development Maxim Reshetnikov said that Russia is on the verge of recession. This rather frightening word indicates a consistent recession in the economy for at least six months. So far, the economy provides very contradictory data on its condition and it is problematic to draw any unambiguous conclusion. Experts are ready to agree with the indisputable slowdown in GDP growth, but it is too early to talk about a real recession. In the Izvestia article, we will look at the indicators on the basis of which it is possible to fix a recession or its absence.
GDP
The key indicator of a recession is the growth or decline of GDP. A technical recession is usually recorded when GDP declines for two consecutive quarters. This definition is not strict. For example, in the United States in 2023, conditions characterized a technical recession developed, but due to the extremely shallow recession, it was not officially registered.
According to a new Rosstat estimate, the Russian economy grew by 1.4% in the first quarter of 2025. But this is compared to the same period last year. From the point of view of the probability of a recession, we are more interested in how the indicator behaved in relation to the previous quarter. Here, after taking into account seasonal and calendar factors (the 1st quarter was the smallest in terms of the number of working days), the decline was 0.6%. If the trend continues, the technical recession will be registered by the end of the current month.
But there are a couple of "buts" here too. Firstly, we see a strong decline in the extractive industry (by 3.9%), which depends on global conditions. Most of the other sectors, from manufacturing to the financial sector, continue to show growth both year-on-year and quarter-on-quarter. The sphere of real estate transactions, as well as retail and wholesale trade, is in the red. In general, the indicators look rather ambiguous, and predictions should be made with some caution before the release of full-fledged data for the second quarter.
Business activity
Judging by these data, the Russian economy remains in a state of growth, perhaps not too fast. The PMI index in the service sector, having dropped slightly in April, jumped again to 52.2 points in May (a reading above 50 means growth, below — a fall). The manufacturing PMI was also positive (50.2 points), while in April it was in the negative zone. Finally, the composite index, averaged across all industries, reached 51.4, compared with 49.8 in April. It remains to wait for the figures in June, but so far everything looks like business activity is in a slight plus.
The objection is that the PMI is an indicator of sentiment rather than solid data. The situation when the PMI is in the red and the economy is growing has happened repeatedly. The opposite is quite possible. In any case, compared to the indicators of 2023-2024, when the indices reached 54-55 points, the current growth looks rather modest.
Unemployment
It remains extremely low. After some growth in March, it fell to 2.3% in April, which is a historic low. For comparison, a year ago the figure was 2.8%, and the average unemployment rate over the past five years has exceeded 4%. This is a key element of an overheating economy — an attempt to meet increased demand leads to an increase in hiring. It is hardly possible to talk about a recession with ultra-low unemployment.
But even here everything is not so clear: for example, the HH index indicates that the number of resumes per vacancy is actively growing, now amounting to more than 5:1. During the period of the toughest labor market for employers, it was about 3-4:1. The current indicator is close to the average and cannot directly indicate either rapid growth or economic decline.
In general, one should keep in mind the obvious maxim: the labor market is almost always a lagging indicator. As a rule, companies start mass layoffs only when they have several months or even quarters of recession. In Russia, where layoffs are not practiced in many sectors in principle (instead, for example, there is a reduction in wages or working hours), this indicator should be used with caution.
Lending
Everything is pretty obvious here: lending is slowing down under the pressure of ultra-high refinancing rates and harsh macroprudential measures, and in some places it is completely frozen. For example, the average size of credit card limits is rapidly falling. In addition, we are seeing a collapse in car loans, mortgages (in both areas — by more than 50%), retail lending, and so on. The volume of loans to businesses is also falling.
Nevertheless, although credit is extremely important for the economy, its decline alone cannot speak of a recession in Russian conditions. If we talk about business, it often develops either through a variety of preferential loans or even budget funds, or at the expense of its own money. As for citizens, they have accumulated huge amounts of money in their accounts for two years in a row due to income growth and can increase consumer spending without even going into debt. The Russian economy as a whole is less dependent on borrowed funds than, for example, the American one. A reduction in lending is a significant but not exhaustive signal.
A matter of interpretation
In general, the experts interviewed by Izvestia do not believe that a recession is already on the threshold. Hovhannes Ohanisyan, director of the analytical department of Digit Broker, noted that the results of the first quarter were not important: GDP growth was 1.4%, the contribution of net exports decreased, and consumption growth slowed. But there are also opposite trends.:
— Investments continue to grow: according to the latest data, they increased by 8% in January–May. Government spending is also growing. Research by CMAKP and the Institute of Applied Sciences of the Russian Academy of Sciences indicates a return to more vigorous growth than in the first quarter. Builders are trying to quickly hand over housing to buyers in order to receive funds from escrow accounts. And last year's record profits in many sectors provide an opportunity for companies to embark on their investment plans or complete investments initiated in the previous cycle. Consumption in January–May is growing by 2%, and government spending is growing significantly. All components of GDP except net exports show growth. But perhaps the ministry sees the picture differently," the expert points out.
According to Ohanisyan, GDP growth of 3% now looks like an optimistic forecast, but we can expect a return to growth at 2.5%, especially if the Bank of Russia continues to cut rates further.
Olga Belenkaya, Head of the Macroeconomic Analysis Department at Finam, in turn, notes a slowdown in economic growth, which everyone agrees with.
— It is connected with the likely exhaustion of the possibilities of the 2023-2024 growth model (for the continuation of which there were no more available resources) and with the actions of the Central Bank and the Ministry of Finance aimed at slowing down high inflation (for which a "controlled" cooling of the economy was necessary). The discussion about the state of the economy between the heads of the economic unit at the SPIEF is a matter of interpreting evidence and business surveys," Olga Belenkaya summarizes.
If, in general, the current economic situation can still be considered as a "soft landing", then the dynamics of economic activity is highly heterogeneous, the data are multidirectional, the expert believes.
— Rather, they speak in favor of continued economic growth this year (our forecast is about 1.5%), although this is significantly slower than in 2023-2024 and lower than the April forecast of the Ministry of Economic Development (2.5%). By the end of the year, no recession is expected, although taking into account the decline in GDP in the first quarter of 2025 by 0.6% compared to the previous quarter, seasonally adjusted, an intraannual technical recession cannot be completely excluded. However, the risks are associated with the uneven dynamics of economic activity by industry and with the inevitable lag in economic data," the Izvestia interlocutor notes.
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