Higher growth: why the Russian authorities do not believe in an economic recession

The tone of the jubilee Moscow Financial Forum was set by the plenary session on the challenges and tasks facing the financial system: Elvira Nabiullina argued that the recession of the economy had begun in Russia. Now there is only a slowdown in its growth. Moreover, the larger the budget deficit, the higher the key one will be, the head of the Central Bank emphasized. The budget for the new three-year period will help to soften monetary policy, Anton Siluanov believes. According to him, the financial plan should be more "muscular" in order to respond to any external constraints. Labor productivity was also at the center of attention of the session participants — in Russia it is in no way lower than in developed European countries.

What will happen to the Russian economy in 2025

The X Moscow Financial Forum was held in the capital on September 18. The morning session "Financial System: Challenges and Tasks" set the tone for the whole event. The discussion was attended by Central Bank Governor Elvira Nabiullina and Finance Minister Anton Siluanov, as well as Moscow Mayor Sergei Sobyanin.

The moderator of the session, Andrey Makarov, head of the State Duma Committee on Budget and Taxes, reminded the speakers about the slowdown in the Russian economy. GDP grew by 0.4% year-on-year in July, and increased by 1.1% in seven months. This was stated by President Vladimir Putin at the last meeting on economic issues.

The Russian economy should smoothly go through a planned cooling period, the finance minister said. According to him, the issue of stimulating or cooling off relates primarily to the budget and monetary policy. The main thing now is "not to overdo it" and "not to underwork," the Finance minister said.

At the same time, the head of the Central Bank, Elvira Nabiullina, stressed that there are no signs of an economic recession in the country right now.

— Do not confuse the recession, which, I agree, is associated with very negative phenomena, a slowdown in the economy. Yes, the economy is slowing down, but there is no recession. And even when they talk about a technical recession, they mean that the economy has been declining for two quarters in a row, and this is not observed in our country," she drew attention.

When determining a recession, experts assess a range of factors, including employment and real incomes of the population, industrial production, dynamics of retail sales and services, Denis Astafyev, fund manager and founder of the SharesPro fintech platform, recalled. He explained: as long as these indicators do not show a systemic and prolonged decline, it is incorrect to talk about a recession, even if individual industries are under pressure.

What is Russia's budget expected to be?

Anton Siluanov said that the budget should help "soften monetary policy." He explained: for this, two instruments were used as a basis that affect finances, budgets and banks — the rate and the budget impulse. The Minister of Finance called the obligations to citizens and businesses the priorities of the financial plan for 2026-2028.

"The second most important area is ensuring defense and security, and the security of not only the country but also the people. <...> And the third is the national goals set by the president," he explained.

According to him, Russia's allies are the army, navy and sustainable finances, for which it is necessary to reduce dependence on various budget constraints, "whether price or volume."

In addition, the Finance minister emphasized that the budget needs to be made more "muscular" so that it responds to any restrictions.

Natalia Milchakova, a leading analyst at Freedom Finance Global, believes that this can be achieved by reducing revenues from the sale of energy resources.

In particular, the Ministry of Finance will "reduce the budget's dependence on oil and gas by a dollar every year," reducing the cut-off price under the budget rule from the current $60 to $55 per barrel by 2030, Anton Siluanov said. He specified that the share of neftegaz in the treasury will be about 20% — for comparison, previously it was under 50%.

In the course of the structural restructuring of the economy, Russia now has a new leader — industry, including chemical, mechanical engineering, semiconductor industry, pharmaceuticals, and medical equipment manufacturing, Natalia Milchakova noted. Such industries should be provided with more tax benefits — in this case, the budget will have more non-oil and gas revenues. And from the proceeds from the export of raw materials, it is better to continue to generate revenues to the National Welfare Fund in order to create reserves for the economy for the future, the expert said.

At the same time, the rate affects the entire economic policy of the country, and a balanced budget allows the Bank of Russia to act gently, the minister explained. According to the head of the department, if the key is lower, the national currency will weaken. At the same time, the higher the budget deficit in Russia, the higher the rate will be, said Elvira Nabiullina. Its regulator will decrease gradually.

The high budget deficit directly limits the possibilities for monetary policy easing. The more actively government spending accelerates domestic demand, the higher the risks of inflation and the tougher the Central Bank's policy should be, says Denis Astafyev of SharesPro. He added: this leads to an increase in budget expenditures on servicing public debt, and businesses and the public face more expensive loans and reduced availability of financial resources.

But with a low interest rate, it becomes unprofitable for investors to hold ruble assets — imports are growing, and the trade surplus is decreasing, the expert believes.

What is happening with the labor market in Russia

Despite the high key rate, some enterprises increase labor productivity even without budget support, the head of the Bank of Russia noted.

— We are really concerned about the factors that slow down the rapid recovery from overheating and the transition to sustainable growth: the state of the labor market. We are now seeing scattered signs that labor market tensions are slightly decreasing," Elvira Nabiullina emphasized.

In addition, she continued, the economy is currently undergoing structural restructuring, and therefore uneven dynamics is observed in different sectors. Unevenness is a consequence of structural changes. However, increasing labor productivity is the only possible way to achieve high economic growth rates, there are no alternatives, the head of the regulator believes.

According to Anton Siluanov, it's time to improve the efficiency of enterprises, work with labor productivity, and not help sloppy people from the budget.

— When the Ministry of Finance is asked about labor productivity, probably at first glance, the simple answer comes — we need to invest more in machines, equipment, robots, and so on, and allocate money for this. Probably, yes, it really helps," he said.

At the same time, the head of the ministry stressed that this issue is deep—rooted - the issue of productivity and efficiency of the economy cannot be solved with machines, equipment and money alone.

According to Denis Astafyev from SharesPro, government support should be targeted and conditional, that is, provided only when measurable results are achieved — output growth, exports or employment. This approach reduces the economy's dependence on budget injections and forms the basis for sustainable long-term growth, the expert said.

Moscow Mayor Sergei Sobyanin drew attention to the fact that labor productivity in Russia is comparable to that in Germany and Italy. At the same time, Germans have a long lunch break, a short work week and the opportunity to drink beer, he said. In response, the Finance Minister ironically "protested" that Russians could not afford a glass of wine at work. "If Italy and Germany have the same productivity, then why don't we drink the same glass of wine during the working day?!" Anton Siluanov joked in response.