Russian economy on verge of recession, minister warns
Russia's economy minister warned that the country was 'on the verge' of recession, issuing the downbeat message on the second day of a forum designed to bolster economic confidence.
The Russian economy has been marked by volatility since it launched its full-scale military offensive on Ukraine in 2022, with growth now slowing after a period of what officials called 'overheating'.
Moscow reported strong economic expansion in 2023 and 2024, largely due to massive state defence spending on the conflict.
But economists have cautioned that growth driven by the defence industry is unsustainable and does not reflect a real increase in productivity.
'Overall, I think we are on the verge of a recession,' Economy Minister Maxim Reshetnikov told journalists at a panel on the second day of the Saint Petersburg Economic Forum.
He said this view was based on 'current business sentiment and indicators' that were pointing to a slowdown.
'Everything else depends on our decisions,' Reshetnikov said, calling for the central bank to show a 'little love for the economy'.
Russia's central bank jacked interest rates to an eye-watering high of 21 per cent last October to combat inflation and kept them at that level until earlier this month, when it eased them to 20 per cent.
Economists had warned for months that the high interest rate and a downturn in manufacturing were weighing on the economy.
Russia's economic growth slowed to 1.4 per cent year-on-year in the first quarter of 2025, the lowest quarterly figure in two years.
Prices have also been rising across the Russian economy, driven up by the massive government spending on the Ukraine assault and widespread labour shortages.
Annual inflation ebbed below 10 per cent in May but has been more than double the central bank's four per cent target for over a year.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
ABC News
3 hours ago
- ABC News
Prabowo snubbed the G7 to meet Putin. Is Indonesia moving away from the West?
The decision by Indonesian President Prabowo Subianto to skip the G7 meeting in Canada and to visit Russia has raised eyebrows in Western capitals. The official reason provided was that his meeting with Russian leader Vladimir Putin was pre-planned. Prabowo, being a man of his word, had decided to skip the G7 meeting of wealthy liberal democracies in favour of attending the little-known St Petersburg International Economic Forum. Known as Russia's Davos, the forum is where Russia — facing crippling Western sanctions over its invasion of Ukraine — seeks to attract foreign investment and showcase the best of its business and technology. Prabowo was invited as the Kremlin's guest of honour. "It's possible that he wasn't fully aware of the optics," said Australian Strategic Policy Institute senior analyst Gatra Priyandita. "But at the same time, I can also sort of imagine him thinking this might incentivise the West to try harder." Prabowo's decision came after reports earlier this year that Moscow was lobbying Jakarta to house long-range bombers in Indonesia's Papua province, causing anxiety in Australian foreign policy and defence circles. During a meeting with Putin this week, the the pair inked a strategic partnership. Indonesia and Russia's respective sovereign wealth funds signed an agreement worth 2 billion euros ($3.5 billion). Putin was praised for supporting Indonesia's bid to become a full member of BRICS — the 16-member grouping of non-Western nations founded by Russia along with China, India, Brazil and South Africa. Prabowo revelled in the fact that his Foreign Minister Sugiono, who goes by one name, had visited Russia three times within just eight months. "Russia is clever in giving attention to Prabowo," said Radityo Dharmaputra, head of the Centre for European and Eurasian Studies at Airlangga University in Indonesia. "It's not about the forum, but his personal relations with Putin … his willingness to meet with this so called great man in the in the global arena." Prabowo's Culture Minister Fadli Zon has previously gone as far as declaring his boss Indonesia's Putin. Meanwhile, US President Donald Trump's proposed tariffs of 32 per cent against Indonesian goods have burned goodwill in Jakarta. "Increasingly, there is some degree of disillusionment about the United States and the future of US power," Dr Priyandita said. Mr Dharmaputra said Russia was stepping up its engagement at a time when the US and some European countries had cut their funding for several programs in Indonesia. "Other countries are struggling to compete with Russia and China in that regard," he said. Still, Prabowo's Russia trip should hardly be interpreted as a full-scale rejection of Indonesia's partnerships in the West. Since its creation as a nation, Indonesia has practised "free and active" foreign policy — meaning it is non-aligned to either the West or the West's adversaries. Prabowo is no exception. That was shown by the warmth of Anthony Albanese's visit to Jakarta last month after the Australian prime minister won re-election. As was the visit of Deputy Prime Minister and Defence Minister Richard Marles to Jakarta earlier this month. French President Emmanuel Macron also visited Jakarta to great fanfare only a few weeks ago. Analysts say Jakarta's ties to the US and Australia on a range of fronts remain much stronger than those with Moscow. Russia had never been a reliable investment partner for Indonesia, said Mr Dharmaputra. For example, Russia withdrew as an investor from the Borneo railway project in 2022 — which had been billed as an "historic milestone" for a Russian-backed initiative in the country. While Indonesia may purchase some arms from Russia, economic ties are lacklustre. Last year, China was the third largest foreign investor in Indonesia and the US was the fourth. Prabowo's decision to dodge the G7 may in fact have been partly motivated by domestic political factors, Dr Priyandita said. Indonesia, like most of South-East Asia, is out of step with Western powers in relation to Israel, its war in Gaza and attacks on Iran. The G7 leaders' statement affirmed Israel's "right to defend itself" and declared Iran was the "principle source of regional instability and terror". Being seen to buy into that narrative in Indonesia — a Muslim-majority country that has never recognised Israel and where public support for the Palestinian cause is immense — could be politically disastrous. Prabowo only recently attracted criticism for comments he made during Macron's visit, indicating that Indonesia might establish diplomatic relations with Israel if Israel recognised a Palestinian state. So, the visit to St Petersburg may have been motivated more by Putin's flattery and avoiding headaches at home than a pointed snub of the West. Prabowo has declared his foreign policy philosophy is "one thousand friends and zero enemies". His visit to Russia is a timely reminder that Indonesia, the largest economy in South-East Asia, does indeed have many friends.
News.com.au
6 hours ago
- News.com.au
South Australia shaken by jobs challenges and Premier Peter Malinauskas must be at top of his game
South Australia's foundations are being shaken by global and natural forces, with tempestuous times ahead. In a tumultuous past fortnight, bedrocks of the state economy, employing thousands of people, have been plunged into doubt. Santos, the state's biggest company by far, is the target of an almost $30bn takeover bid by an Abu Dhabi raider, casting great uncertainty over the future of its Adelaide head office. The $368bn nuclear-powered submarine project centred on Adelaide is under threat from a 30-day United States review assessing its alignment with President Donald Trump's America First agenda. Despite some heartening rain, the drought continues to ravage the state's farms – SA primary industries generate $17.1bn annually. State debt was forecast to soar to $48.495bn in the state budget unveiled on June 5, after which the influential S & P Global Ratings warned big new spending ahead of next March's state election could trigger a credit rating downgrade. The purse strings will continue to be tested by the Whyalla steelworks and mine, as the budget set aside $384m in state and federal funds for a potential six-month extension of the state-induced administration. The Malinauskas government might have repeatedly ruled out an ownership stake in Whyalla's steelworks but a $2.4bn state/federal rescue package leaves both on the hook until a new owner is found. Public sector unions are restless. The SA Salaried Medical Officers Association on Thursday rejected a 10 per cent pay rise over three years and recommitted to walking off the job on Wednesday. These are extraordinary and foundational challenges, of varying degrees of concern, to the state economy and, most particularly, the potential for today's aspirational young South Australians to find well-paid, challenging jobs. The risk of Santos's head office leaving Adelaide should not be dismissed lightly. A foreign takeover, as my colleague Giuseppe Tauriello observed on Wednesday, would significantly diminish the last corporate heavyweight left standing in South Australia. Santos dwarfs other SA companies for jobs, investment, sponsorship and general corporate clout. It is four times the size of the state's second biggest firm, Argo Investments, and more than eight times the size of third-ranking Codan. Business success matters in a state where the population is overwhelmingly concentrated in the capital, and most jobs are underpinned by state and federal government spending of some form. Santos and partner Beach Energy in January officially opened a nation-leading Moomba carbon storage project, billed as kickstarting a $600bn industry and hailed by Premier Peter Malinauskas as a 'historic day for our state'. Mr Malinauskas responded to the Santos takeover bid by declaring his government's 'priority at all times is to ensure that South Australian jobs remain in South Australia, and to maintain Santos' headquarters in Adelaide'. This will be a test of his government's mettle and resolve, along with its legislative levers that include ministerial approval for a change in controlling interest of a petroleum resources licence holder, like Santos. Opposition Leader Vincent Tarzia, in his Tuesday budget reply speech, predictably painted a bleak picture of a state ravaged by debt, skyrocketing costs, unaffordable homes and a floundering health care system. Nine months out from the next state election, he vowed to deliver a 'debt management plan' to ensure this was at 'a sustainable level'. Mr Tarzia declared the state was 'at a crossroads'. He was right, although the future is always uncertain. Mr Malinauskas has a strong story to tell on economic confidence, a historically low jobless rate and the state's standing in the nation. But he will be justifiably wary of overconfidence ahead of the state election, even if his opponents are at a historically low ebb in their standing. The state is facing some serious challenges and the Premier will need to be at the top of his game.
News.com.au
7 hours ago
- News.com.au
Russian economy on verge of recession, minister warns
Russia's economy minister warned that the country was 'on the verge' of recession, issuing the downbeat message on the second day of a forum designed to bolster economic confidence. The Russian economy has been marked by volatility since it launched its full-scale military offensive on Ukraine in 2022, with growth now slowing after a period of what officials called 'overheating'. Moscow reported strong economic expansion in 2023 and 2024, largely due to massive state defence spending on the conflict. But economists have cautioned that growth driven by the defence industry is unsustainable and does not reflect a real increase in productivity. 'Overall, I think we are on the verge of a recession,' Economy Minister Maxim Reshetnikov told journalists at a panel on the second day of the Saint Petersburg Economic Forum. He said this view was based on 'current business sentiment and indicators' that were pointing to a slowdown. 'Everything else depends on our decisions,' Reshetnikov said, calling for the central bank to show a 'little love for the economy'. Russia's central bank jacked interest rates to an eye-watering high of 21 per cent last October to combat inflation and kept them at that level until earlier this month, when it eased them to 20 per cent. Economists had warned for months that the high interest rate and a downturn in manufacturing were weighing on the economy. Russia's economic growth slowed to 1.4 per cent year-on-year in the first quarter of 2025, the lowest quarterly figure in two years. Prices have also been rising across the Russian economy, driven up by the massive government spending on the Ukraine assault and widespread labour shortages. Annual inflation ebbed below 10 per cent in May but has been more than double the central bank's four per cent target for over a year.
