Russia’s Sanctions-Hit Economy Expected to Slow Next Year, Says VTB CEO
Russia’s sanctions-hit, militarized economy is expected to slow next year, according to Andrei Kostin, CEO of Russia’s second-largest lender, VTB. Kostin predicted that GDP growth will slow to 1.9% in 2025, above the International Monetary Fund’s forecast of 1.3%. The country’s economic growth is expected to be stagnant due to the ongoing war and numerous sanctions imposed on Russia.
Kostin noted that one third of the state budget is allocated to the military, making it difficult for the economy to function normally. However, he emphasized that the country has been experiencing economic growth, albeit modest, despite the challenging situation.
The CEO criticized the central bank’s hawkish monetary stance, stating that the current inflation rate of 8.5% does not require a benchmark interest rate of 23%. He likened the central bank’s governor, Elvira Nabiullina, to Margaret Thatcher, known for her tough economic policies.
Kostin believes that Western sanctions, high military spending, and state subsidies on many loans make the benchmark interest rate less effective in managing inflation. He also expects the Russian rouble to stabilize at around 100 to the dollar, after a period of volatility.
The CEO predicts that Russian banks’ profits will fall by 27% in 2025, with lending growth slowing to 10% next year from 20% in 2024. He does not foresee mass bankruptcies in vulnerable sectors, such as coal mining and real estate, due to the current interest rate.