Russia’s central bank reveals GDP is shrinking, in a sign Putin’s war economy has slipped into recession

Key Takeaways:

• Russia’s central bank reports a shrinking GDP this year.
• Officials deny that the economy is in a recession.
• Interest rates were cut from 18% to 17%, marking the third reduction since June.
• The Bank of Russia cites sky-high borrowing costs for its decision.
• Observers remain uncertain about the country’s economic trajectory.

Russia’s Central Bank Decision

Russia’s central bank announced on Friday yet another lowering of its benchmark interest rate, signaling renewed efforts to steer the economy through a period of uncertainty. Despite official denials of a recession, the bank’s own data show that GDP has been shrinking.

A Series of Rate Cuts

This latest move reduces the key interest rate by one percentage point to 17%. It is the third reduction since June, following what the central bank describes as “sky-high borrowing costs.” Policymakers appear to be grappling with slowing economic activity, prompting continued monetary policy adjustments in an effort to spur growth or at least mitigate damage.

Recession Debate

Even as Russia’s central bank acknowledges a contracting GDP, it insists the economy is not truly in a recession. This contradiction—accepting evidence of an economic downturn while dismissing the term “recession”—has led to speculation about official messaging. Some observers view the repeated rate cuts as tacit evidence of deeper concerns.

Policy Rationale

High borrowing costs can hamper investment and consumer spending, so the Bank of Russia’s choice to cut rates again underscores the desire to foster easier financial conditions. Still, the move raises questions about how effective monetary policy can be when broader indicators, like GDP, point to a market under strain.

Outlook and Uncertainty

The contradiction between official statements and data leaves many wondering about Russia’s economic direction. As the Bank of Russia continues to reduce rates in response to relatively tight credit conditions, economists will watch closely for signs of deeper trouble or potential stabilization in the months ahead.