Despite the regular timbres of the Kremlin, “the Russian economy is decreasing,” according to Adina Revol, former spokesman for the European Commission in France, interviewed this Tuesday, June 10 at BFM Business.
Specifically, inflation slows down in Russia, but is at a very high level, with 9.8% for a year in June, according to the Central Bank (BCR). Food prices have particularly risen, especially potatoes, a basic food in the country.
Retail data indicates that potato prices have tripled in supermarkets compared to last year, reaching a historical level of 85.4 rubles ($ 1.05) per kilogram in May, according to the Daily Kommersant cited by the Reuters agency. Imports, mainly from Egypt, do not compensate for the impact of the shortage caused by the bad harvest of last year.
Inflation is also driven by the shortage of labor that increase wages without economists notice productivity.
This weakness should not be resolved in the medium term, while hundreds of thousands of men have been sent to the front and that one million people would have fled the country to avoid mandatory military service according to certain estimates.
Penalized for falling in oil prices
Consequently, the key rates of the Russian Central Bank are very high even if the deposit rate was checked slightly last week to 20% (against 21% precedence).
This remains the highest level for two decades and the period that followed the fall of the USSR. This tends to stop growth prospects, while GDP has resisted quite well so far (+4.1% last year and 3.6% in 2023). These extremely high indebtedness rates are an obvious obstacle to investment in Russia.
The economic growth of Russia has so far been fed by the expenses related to the war in Ukraine, which has been happening for three years, and is considered overheating, with this very high inflation rate.
Russian statistics do not specify whether production is intended for military purposes, but the statistical agency said that the production of finished metal products increased by 35% and the production of optics and electronics by 29%.
A drying mana
However, overheating seems to be coming to an end. GDP growth fell to 0.8% in the annual change in February, against 3% in January, the lowest figure since March 2023. The Ministry of the Economy establishes a growth of 2.5% in 2025, against a prognosis of the central bank from 1 to 2%.
The Russian economy must also be penalized by falling in oil prices (-18% for a year, $ 67 per barrel of Brent). This situation runs the risk of weighing the Russian budget balance, while the entry of hydrocarbons represents a third of tax revenues in Russia.
Until now, the deficit was partly covered by the Russian Sovereign Fund (RDIF). However, this unexpected gain seems to “dry since reserves are used for war effort,” as Adina Revol pointed out in the BFM business set.
The volumes of liquid assets of this fund fell from 108 billion euros to early 2022 to 36 billion dollars in early 2025, according to an office of the Reuters agency.
Source: BFM TV
