In the second quarter of 2025, Russia’s economy showed positive dynamics — according to preliminary estimates, GDP grew by 1.5% year-on-year. This allowed the country to avoid a technical recession, defined as two consecutive quarters of economic decline. However, experts warn that this growth is superficial and largely supported by government spending, particularly in the defense sector, reports Baltimore Chronicle citing the First Business.
Following a GDP contraction in the first quarter — the first drop since 2022 — the Bank of Russia reported signs of recovery. According to its data, annual growth accelerated to 1.8%, although domestic demand remains weak. Economy Minister Maxim Reshetnikov expressed concern back in June that the country might enter a recession due to prolonged high interest rates, which had been maintained at 21%.
Central Bank Governor Elvira Nabiullina stated that the economy is emerging from an overheating phase caused by military spending and attempts to offset sanctions pressure. The recent cut in the key interest rate to 18% signaled a gradual easing of monetary policy, although lending rates remain high, restraining consumption and investment.
President Vladimir Putin acknowledged that risks of economic cooling persist but stressed that the Central Bank sees no reason for panic. Meanwhile, businesses report declining demand, reduced lending, and rising borrowing costs.
The future of Russia’s economy will largely depend on geopolitical factors. A key event will be Friday’s meeting between Putin and Donald Trump in Alaska. If agreements are reached to end hostilities, this could pave the way for partial sanctions relief and stabilization of the financial system. Otherwise, new restrictions, particularly targeting the energy sector, could accelerate the economic downturn.
We wrote earlier Germany’s exports to Ukraine rise by 30% in 2025.