The resources that allowed the Russian economy to show growth for two years under conditions of war and sanctions have been exhausted, said Elvira Nabiullina, head of the Bank of Russia, at the St. Petersburg International Economic Forum on Thursday, reports The Moscow Times.
“We grew at a fairly high pace for two years because free resources were utilized,” she said.
According to Nabiullina, these resources include labor force, production capacities, capital reserves of the banking system, and funds from the National Wealth Fund, which the government used to patch “holes” in the budget and finance trillion-ruble mega-projects.
“We must understand that many of these resources are indeed depleted,” Nabiullina said (quoted by TASS).
According to Rosstat, the unemployment rate has fallen to a historic low of 2.3%, but mass emigration and conscription of men for the war have created a labor shortage estimated by the government at 2 million people.
The utilization rate of enterprises, according to Rosstat, exceeded 80%, setting a record in modern history. Liquid assets of the National Wealth Fund have been cut threefold since the start of the war — down to 2.8 trillion rubles. The fund’s foreign currency reserves fell to 153.7 billion yuan — the lowest since its establishment in 2008 — and its gold reserves shrank to 139.5 tons, down from over 400 tons before the war. Experts at RANEPA warned the fund could be completely depleted by 2026.
The Russian economy is “on the brink of recession,” said Maksim Oreshkin, Minister of Economic Development, during a session at SPIEF with Nabiullina. According to Rosstat, GDP growth slowed threefold in the first quarter — from 4.1% to 1.4%, and quarter-on-quarter the economy began shrinking for the first time since 2022.
Business profits in March dropped by one-third, and in the key oil and gas sector — by half. Industry is on the verge of stagnation (1.2% growth from January to April), and civilian sectors have started to contract. Retail turnover slowed threefold — 2.4% at the end of April versus 7.2% at the end of December.
In fact, officials in the economic bloc are telling Vladimir Putin that it is time to choose — war or the economy, said the head of one Russian expert center to Novaya Gazeta Europe.
“Voices like this will grow louder and louder,” the expert said. “They will speak in euphemisms, saying that spending is no longer sustainable, the National Wealth Fund is running out, and there is nowhere to replenish it.”
