VLADIVOSTOK: President Vladimir Putin denied on Friday that Russia’s economy was stagnating and said such a view reflected dissatisfaction with high interest rates that he said were necessary to combat inflation.
Sberbank CEO German Gref, one of Russia’s most powerful bankers, said on Thursday that the economy was stagnating and that unless the central bank slashed interest rates then the country would fall into recession.
Asked at an economic forum in the Far Eastern city of Vladivostok whether he agreed with Gref, Putin said he did not.
“No. He (Gref) knows, we are in constant contact with him. He participates in many of our meetings, which are held, including those with me, with the government, and the central bank,“ Putin told the panel discussion at the forum.
Gref is a long-term associate of Putin, drafting the president’s first economic strategy in the early 2000s.
Gref’s remarks as well as comments by many other economists were in line with a graph published in a recent central bank report that showed Russia’s gross domestic product (GDP) shrank for two consecutive quarters, a common definition of recession.
The central bank did not elaborate on this data in its report.
Putin linked talk of a stagnating economy to dissatisfaction in the government with high interest rates but said these were needed to tame inflation, adding that Russia’s central bank was rated very highly in the international financial community.
The central bank hiked the key rate to 21% last year, the highest level since the early 2000s, to bring inflation down. It cut the key rate to 20% in June and then to 18% in July.
Annual consumer price inflation was 8.79% in July, down from 9.40% in June. The central bank expects inflation to slow to its target of 4% in 2026.
“If inflation overwhelms the economy, nothing good will come of it because it becomes impossible to forecast anything even for 10 days, let alone for years ahead,“ he said.
Putin added that the authorities need to ensure a soft landing for the economy and that Russia had room to increase its budget deficit because its debt burden remains low. He also called on the government to work on increasing budget revenues – REUTERS