Russian economy and 3 predicted concerns

The Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF), an organization with close ties to the Kremlin, has issued alarming warnings about Russia’s financial situation. According to CMASF, the risk of a banking crisis is increasing, although a full-blown crisis has not yet occurred.

One of the reasons for the market instability is the sharp fluctuations in the MOEX stock index, the main index of the Russian market, reflecting the growing concerns among investors and the public. At the same time, the pressure on the liquidity of the banking system is also increasing as the ratio of money supply to the monetary base increases sharply, which can cause “cash gaps” in banks.

In a recent report, CMASF stressed that the risk of a “systemic banking crisis” in Russia is more real than ever. This crisis can manifest itself in one of three signs: a massive withdrawal of money from banks by depositors, non-performing loans exceeding 10% of total bank assets, or large-scale recapitalization of banks exceeding 2% of the country’s GDP.

In addition, the Russian Central Bank raised its key interest rate to a record 21% to control inflation of 10.2%. While this measure is aimed at curbing rising prices, it also sharply reduces the ability to lend and invest, while increasing the risk of “money flight” from banks.

Russian economy and 3 predicted concerns - 1

The Russian stock market plunged last week after President Donald Trump threatened to impose new sanctions (Photo: Shutterstock).

The crisis has not only appeared in the financial sector but also spread to the operations of enterprises. A series of large companies in Russia, especially in the mining and energy sectors such as Gazprom, Norilsk Nickel, NLMK and Severstal, have decided to stop paying dividends to shareholders due to a sharp decline in export revenue and tightening international sanctions.

According to the state statistics agency Rosstat, the total revenue of Russian companies in 2024 will fall by 6.9% compared to the previous year, equivalent to a loss of 15% if adjusted for inflation.

The reason is not only the difficult market but also the high cost of borrowing, which narrows the real profits of businesses. Economist Boris Grozovski of the Wilson Institute said: "Increasing energy costs, gasoline prices, wages, transportation costs are all increasing, leading to a sharp decline in the net profits of companies."

The economy is also slowing down significantly. Rosstat said GDP growth in the first quarter of 2025 was just 1.4%, three times lower than the 4.5% in the final quarter of 2024 and nearly four times lower than in the same period last year. Some independent analysts, such as the news site The Bell, believe that the Russian economy could fall into recession in the coming months if current conditions do not improve.

The current situation is a combination of many negative signals, from banking risks to pressure on businesses and low growth, causing macroeconomic and financial risks to increase.

However, Russia’s economic future depends largely on the political developments in Ukraine. If a peace deal is reached, it could open the door to lifting some sanctions and restarting trade between the US and Russia – a move that President Donald Trump has talked about.

In contrast, Kiev and its Western allies still want to maintain economic pressure to force Russia to change its policies, while US lawmakers are preparing a list of new sanctions, increasing pressure on the Kremlin.

Source: https://dantri.com.vn/kinh-doanh/kinh-te-nga-va-3-moi-lo-duoc-du-bao-20250601215929285.htm