‘Approaching zero growth’ Sberbank’s head says the Russian economy is in ‘technical stagnation.’ What exactly does that mean?
Gref says the ‘R’ word
Last week, Russia’s top political and business figures gathered in Vladivostok for the Eastern Economic Forum, the summit that’s become one of the primary domestic platforms for debates about the state of the country’s economy. On the second day of the four-day event, Sberbank CEO German Gref made what quickly became the most-quoted statement of the forum:
The [economic] cooling continues — we can see it in the GDP growth rate. The second quarter can essentially be considered technical stagnation. July and August show fairly clear signs that we’re approaching zero growth.
He went on to warn: “Let’s hope the Central Bank doesn’t allow it to slip into a recession.”
What the hell is ‘technical stagnation?’
These two words are rarely used together. Economists typically speak simply of stagnation, while the qualifier “technical” is more commonly applied to recession, defined as a decline in economic output over at least two consecutive quarters. Stagnation, unlike recession, doesn’t necessarily imply a downward trend. It refers to a state of inertia, where GDP neither grows meaningfully nor contracts significantly. Still, it’s far from harmless: stagnation often follows a period of rapid growth and, due to the cyclical nature of economic activity, can be a precursor to deeper crisis.
At the moment, Russia’s economic trajectory should raise concerns for the Kremlin. In the second quarter, year-on-year GDP growth slowed to 1.1 percent, down from 1.4 percent in the first quarter. By comparison, the same periods in 2024 saw growth of 4.3 percent and 5.4 percent, respectively, versus the corresponding quarters of 2023.
Judging by Gref’s comments, the slowdown is likely to continue into the third quarter of 2025, with growth edging even closer to zero. That’s in contrast to a more upbeat forecast from Finance Minister Anton Siluanov, who, during a Kremlin meeting in late August, predicted full-year GDP growth of at least 1.5 percent.
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The reasons for this economic slowdown are well established. In short, war-related mobilization in certain sectors that had driven the rapid growth of recent years is running out of steam. This is especially evident in civilian industries, which aren’t propped up by state funding and are constrained by the Central Bank’s high key rate. For example, the auto industry and construction materials production have been seeing significant declines for several quarters now.
Gref likely called it “technical” stagnation because the situation doesn’t match some of the other criteria usually associated with the term — for example, stagnation is typically marked by a sharp rise in unemployment. In Russia, however, unemployment is at a historically low 2.2 percent. This paradox can be partly explained by the war, whose combined effects have triggered a labor shortage in the country.
In any case, the trend of economic weakening is clearly worrying senior officials and heads of state corporations. “Technical stagnation” is just another euphemism for describing the signs of crisis spreading through the economy.
How else have Russian officials described the current economic warning signs?
In a variety of ways. Their reluctance to use the word “crisis” became especially clear during the St. Petersburg International Economic Forum in June. That’s when Russian Economic Development Minister Maxim Reshetnikov bluntly stated that the country was “on the verge of slipping into a recession” — a comment that quickly drew strong pushback from other senior officials and business leaders:
- Finance Minister Anton Siluanov likened the state of the economy to a “cold spell,” adding optimistically: “After cold weather always comes summer.”
- Central Bank Governor Elvira Nabiullina described the GDP trend as an “exit from overheating,” reminding the audience that Russia had recently experienced demand-driven economic growth that outpaced supply: “That’s where both the overheating and the inflation came from.”
- VTB Bank CEO Andrey Kostin rejected the notion of a recession outright, while also reaching for a weather metaphor: “What we’re seeing is more like icing, freezing, cooling.” Still, he acknowledged Reshetnikov’s concerns, noting that companies “come to him complaining about tough conditions, because loans have become very expensive.”
By the time of last week’s forum, Reshetnikov had softened his tone. Speaking on the event’s sidelines, he merely observed that the economy was “cooling faster than expected.”
Meanwhile, entrepreneurs at the forum offered a wider spectrum of views in interviews with RBC — from the upbeat claim that the economy is “on the cusp of spring” and experiencing “asynchronous growth,” to a far bleaker take: that a recession has already begun, even if the official statistics haven’t caught up yet.
Meduza’s Razbor (“Explainers”) team