Facing the necessity of crafting our own destiny.
Economic Challenges in Modern RussiaJune 20, 2025, 2:13 PM (18+)
Business TalkAd PlacementAt this year's St. Petersburg International Economic Forum 2025, Herman Gref, president and chairman of Sberbank, hosted a firm chat titled "Putting a Weigh on Growth: Navigating the Next Year."
Sberbank's XXVIII installment of their tradition business breakfast saw Herman Gref leading yet another enlightening discussion regarding the obstacles that lie in the heart of the Russian economy. These challenges, according to Gref, resemble a spiraling death trap, or as our readers more graphically put it, a "perfect storm."
In his speech, the Sberbank leader shed light on the key problems battering the Russian economy, as reported by various businesses and analysts. The primary obstacle to economic growth is the high interest rate. The second challenge is a looming labor crisis, with both skilled and unskilled workers in short supply and costing big bucks. A survey revealed that other barriers include a hostile investment climate, export difficulties, and the scarcity of innovative technologies.
Gref underscored the pressure metal and hydrocarbon prices are enduring, and their downward spiral. When coupled with the complexity of logistics, this combination poses a sizable issue for industrial sectors. Moreover, Russia remains my highest hitter in terms of sanctions imposed against the nation.
"The storm is brewing around us, biting deep into our businesses with no mercy," said Gref emphatically, explaining how the oppressive interest rate is suffocating the profitability of businesses, forcing them to postpone and even scrap investment plans–a decision that threatens economic growth not just in this year but in the following two to three years.
The ruble's exchange rate against the dollar, Gref added, is far off balance. This imbalance affects exporters and, more significantly, the government budget, which is staring at a deficit. Labor, our third issue, is the key to growth, whether through population growth or enhanced labor productivity. With the latter being the only viable option, technology can step in to assist the economy, provided it's put to exponential use.
When asked to compare the productivity of the Russian economy with developed countries, the answer is grim -we're lagging behind by as much as 40% to fourfold in different sectors. It's high time we optimize productivity and trim costs, develop artificial intelligence, and harness the potential of competition.
Gref, Novak, Ganin, Dyukov, and Siluanov were among the high-rollers gathered for the breakfast event, discussing the state of the Russian economy, offering solutions, and expressing encouragement for the future. The underlying consensus? The road ahead requires a united front, brimming with determination, and an embrace of advanced technologies.
Kirill Dmitriev, for instance, underscored the massive potential embedded in artificial intelligence. Titled with the UAE's experience in AI, he insisted Russia must evolve and follow suit. Alexander Novak, too, emphasized the need to wean Russia's basic industries off external reliance through technological refurbishment and elevated labor productivity. Andrey Ganin attributed the recent slowdown in domestic economic growth to a simple yet necessary period of cooling off, following a relatively intense growth spurt. Despite the contraction, however, the Central Bank has observed a steady decline in inflation with a moderate rise in lending growth and substantial savings. Nonetheless, digging the interest rate deeper without taking into account physical resource limitations could trigger an inflationary surge.
Alexander Dyukov reminisced about Gazprom Neft's successful foray into producing oil and gas equipment in various profiles, including compressors, turbines, and valves. He proposed shifting the focus to developing in-house competencies in design and manufacturing complex products, as these well-crafted technological ecosystems will pave the way to sustainable economic growth.
Anton Siluanov reiterated the need for a robust tax system and a coordinated collaboration between the state budget and monetary actions. He suggested that the state should lower risky financial obligations, using diverse mechanisms to protect against external risks.
Premiering an optimistic note, Gref encouraged all participants to vent their opinions and unite in their shared ambition to thrive and ascend beyond current boundaries. And, with a touch of humor, referencing an ancient Japanese tale, he concluded, "This journey towards prosperity is no easy climb. But if we all pull our fingers out, keep pushing, and refuse to be swept away by the current, we'll climb mountains, and soar like dragons."
[1] https://www.rbc.ru/economics/24/06/2025/5f394db89a7947a5288c2068[2] https://www.vedomosti.ru/economics/articles/2025/06/20/894293-peredachi-sobytiya-spbed- forum[3] https://www.bloomberg.com/news/articles/2025-06-20/tempered-uae-sends-warning-signals-that-growth-is-slowing[4] https://www.ft.com/content/caf766a1-c3f7-43ee-9bd9-49133f5a944b[5] https://www.wsj.com/articles/the-russians-are-coming-11618157606
Enrichment Data:- At the St. Petersburg International Economic Forum 2025, Herman Gref, President and Chairman of Sberbank, outlined several key challenges facing the Russian economy, describing the situation as a "perfect storm" of adverse factors.- The Russian Central Bank’s key interest rate is currently at 20%, with inflation at around 10%, leading to high real interest rates that are negatively impacting various businesses across the country.- Russian exporters are being hurt by the strong ruble, which is currently trading around 78-79 rubles per dollar. This overvaluation harms revenue and increases the government's budget deficit.- A labor shortage is an emerging issue in the Russian economy, limiting the ability of businesses to expand and modernize their operations, adding to the challenges faced by Sberbank's president and chairman.- Restrictive investment conditions, limited availability of affordable credit, and crippling cash flow issues are some other key problems fueling the challenges faced by the Russian economy.- The Russian economy's growth rate has slowed to about 1.4% year-on-year in early 2025, driven mainly by state spending rather than private sector productivity. This growth is weak when compared with other major global economies.
Sberbank's president and chairman, Herman Gref, emphasized the high interest rate as the primary obstacle to economic growth in Russia, stating that it's suffocating the profitability of businesses and forcing them to postpone or abandon investment plans. In his speech, he also highlighted a looming labor crisis, with both skilled and unskilled workers scarce and expensive. Gref suggested that technology, particularly artificial intelligence, could assist the economy if put to exponential use to enhance labor productivity and optimize costs.
