Russia cuts growth forecast as Putin’s war economy runs out of momentum

{"text":[[{"start":7.75,"text":"Russia has slashed its economic growth forecast for this year from 1.3 per cent to 0.4 per cent despite soaring energy prices. "}],[{"start":17.4,"text":"Alexander Novak, Russia’s deputy prime minister, on Tuesday blamed labour shortages, excessive government spending and western sanctions against Russia for the stark downgrade. "}],[{"start":28,"text":"The reduction, compared with the 1.3 per cent forecast issued by the economic ministry last September, lays bare the fragile state of the Russian economy. "}],[{"start":37.1,"text":"After several years of growth fuelled by military spending, every additional month of Russian President Vladimir Putin’s war in Ukraine is adding to a growing number of economic strains. The economy shrank by 0.3 per cent in the first three months of the year, the first quarterly contraction since 2023."}],[{"start":55.85,"text":"The economy is struggling even as the Middle East conflict has pushed up oil and gas prices. Russia would need oil prices to remain above $100 a barrel for significantly longer to smooth over its other economic problems, experts have warned."}],[{"start":70.7,"text":"In an interview with the Russian business newspaper Vedomosti published on Tuesday, Novak also cited a “change in the structure of spending”, including growing social and military expenditure, among the main challenges facing the economy."}],[{"start":86.10000000000001,"text":"He insisted, however, that the economy would maintain “positive momentum” this year. He expects the country’s economic growth to steadily increase to 2.4 per cent in 2029, although that would still mark a sharp drop compared with GDP growth of more than 4 per cent in 2023 and 2024."}],[{"start":106.15,"text":"“Economic dynamics are cyclical; a period of high growth is always followed by an adjustment,” said Novak, describing the current stage as “normal”."}],[{"start":null,"text":"

"}],[{"start":114.60000000000001,"text":"Alexandra Prokopenko, a fellow at the Berlin-based Carnegie Russia Eurasia Center think-tank and former Russian central bank official, called the update “not abrupt, but logical” after the first-quarter contraction."}],[{"start":127.25000000000001,"text":"Russia’s economy has been trapped between several interlinked sources of pressure: ballooning state spending fuels inflation, forcing Russia’s central bank to keep its key interest rate punishingly high. It has remained in double digits for more than three years and at present stands at 14.5 per cent."}],[{"start":144.8,"text":"Despite slowing demand across the economy, the state lacks the resources to support businesses, leaving them dependent on credit. With interest rates high, many are struggling to service their debts, increasing pressure on the banking sector as the share of non-performing loans rises."}],[{"start":162.15,"text":"All these problems have further accelerated as Russia’s earnings from oil and gas have been declining year on year, with the war in the Middle East bringing only limited relief. "}],[{"start":172.55,"text":"Novak described the impact of the Iran war as “shortlived” and said Russia continued to stick to a conservative forecast for oil prices for its budget planning, using a projection for Urals — Russia’s main crude blend — of $59 a barrel on average in 2026 and $50 over the following two years."}],[{"start":191.4,"text":"After peaking in April, Urals prices have dropped below $100/barrel and now stand at just above $80, according to Argus pricing data. The sanctions-driven discount for Urals compared with the Brent international oil benchmark, which narrowed at the height of the Middle East conflict, has begun to widen again."}],[{"start":211.15,"text":"Russia’s energy revenues between the start of January and end of April were 40 per cent down year on year. This was despite April marking the highest monthly figure since October 2025. Part of the reason April’s results did not offset more of the earlier losses was that the state increased payments to oil producers to keep domestic fuel prices under control."}],[{"start":232.8,"text":"“Translating from bureaucratic to a normal human language, Novak admits that Russia has increased spending all across the board, and now it is becoming an issue,” Prokopenko said. "}],[{"start":243.45000000000002,"text":"“The need for unpopular decisions on spending priorities remains, and Novak is signalling, including to Putin, that they will eventually have to be made,” she said."}],[{"start":260.8,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778629827_6127.mp3"}