Russia's Officials Keep Contradicting Putin on War Economy

Miami Herald

a day ago

Russia's economy faces a tough 2026, the head of the country's biggest bank has said in the latest official warning about the country's finances, which is at odds with Vladimir Putin's rosier public pronouncements.
German Gref, CEO and chairman of the executive board of Sberbank, said a spike in inflation and the high key interest rate were problems that could not be solved quickly. His comments come only days after Russian Central Bank Governor Elvira Nabiullina and economy minister Maxim Reshetnikov issued their own warnings about wartime growth.
This is despite Putin dismissing concerns about Russia's economy which he insisted remained strong despite sanctions and war.
Even in an authoritarian country like Russia, there is freedom in economic policy debates, Vasily Astrov, an expert on Russia's economy told Newsweek on Tuesday, but each official will make statements that reflect the interests of their groups.
Newsweek has contacted the Russian finance ministry for comment.
Russia has faced economic turbulence caused by sanctions imposed after Putin's full-scale invasion of Ukraine that are aimed at choking Moscow's military machine.
Strong GDP has been driven by high military spending amid predictions for harder times as inflation and high interest rates take their toll.
But despite Putin's rhetoric, his officials are becoming more vocal about the impact of sanctions, falling oil prices, wartime spending, and labor shortages.
Gref's warning is the latest signal of a wider economic slowdown in Russia that could raise questions on Moscow's ability to sustain the war.
At Sberbank's meeting on Monday, Gref said the quality of his bank's loan portfolio is deteriorating, with a growing number of requests for debt restructuring by retail and corporate borrowers.
In comments reported by business newspaper RBC, Gref also said 2026 will not be an easy year either, although much will depend on geopolitics and on how the dynamics of GDP growth will develop.
He said another factor will be the key rate set by the Central Bank, which was lowered from 21 percent to 20 percent in June. The high rate is aimed to curb official inflation of 9.9 percent although analysts say it stifles investment.
Gref's comments follow a somber warning he gave at the St. Petersburg Economic Forum last month, when he referred to a "perfect storm" of problems for the economy. These included real interest rates between the key rate of 20 percent and annual inflation of 10 percent hurting business profits and forcing companies to postpone investment.
At the same event, Central Bank head, Nabiullina, credited for steering the wartime economy, said growth had been predicated on free labor resources but that many of these "have really been exhausted" and that a new model was needed.
Meanwhile, economy minister Reshetnikov said current business sentiment pointed to Russia being on "the brink of transitioning into recession."
However, Putin quoted Mark Twain when asked at the forum whether his war in Ukraine was "killing" the Russian economy, by replying "rumors of my death are greatly exaggerated" as he said growth in the country outpaced global rates.
Astrov, from the Vienna Institute for International Economic Studies, told Newsweek there is still a lot of freedom in Russia on economic policy debates unlike in countries, such as Turkey for example, so it was not surprising there were different opinions by officials.
Often these differences can be traced to officials' respective affiliation and because high interest rates suppress economic activity, economy minister Reshetnikov is arguing for lowering them and portrays the situation negatively, he said.
But Central Bank head Nabiullina is downplaying the risks because acknowledging them openly would be tantamount to self-criticism, given that her tight monetary policy has been the most important factor behind the recent slowdown. This is why she is talking about a planned cooling of an overheated economy, Astrov said.
He said that he was almost sure that Nabiullina will ease monetary policy further, very likely at the next meeting in July, justifying it with the recent decline in inflation, rather than risk economic stagnation and recession.
German Gref, head of Sberbank, Russia's largest bank on Monday: "2026 promises to be not the easiest [year] either. That is why we need to get in good shape in 2025.
"Much will depend on geopolitics, on how the dynamics of GDP growth will develop…but it is already clear that it will not be simple, because, in fact, the first half of 2026 is already visible."
Maxim Reshetnikov, Russian economy minister, June 19 at the St. Petersburg International Economic Forum: "Based on current business sentiment, it seems to me we are on the brink of transitioning into recession."
Elvira Nabiullina, head of Russia's Central Bank, June 19: "We have been growing for two years at a fairly high rate due to the fact that free labor resources were used... "But many of these resources have really been exhausted."
Russian President Vladimir Putin told the same forum: "Rumors of [the Russian economy's] death are greatly exaggerated."
Vasily Astrov, Vienna Institute for International Economic Studies: "There is still quite a lot of freedom in Russia when it comes to economic policy debates, the state of economy, unlike in Erdogan's Turkey, for example. So, it is not surprising that there are different opinions expressed by various officials."
In Q1 2025, Russia's economy expanded 1.4 percent year-on-year, its slowest pace in two years and the World Bank forecasts further sluggish growth amid assessments of underlying productivity stagnation.
Meanwhile, a banking crisis in Russia looms because of growing defaults not yet reflected in official statistics, with problem loans possibly reaching 3.7 trillion rubles ($47.3 billion) or one-fifth of the banking system's capital, according to Bloomberg.
Current and former banking officials told the outlet there is a growing risk of a debt crisis in the next year if circumstances don't improve.
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