Russia's top officials have outlined numerous proposals to President Vladimir Putin on how to kick-start the war economy after he scolded them for what amounts to the nation’s sharpest economic contraction in more than three years.
Russia's economy, which contracted in 2022 but grew in 2023, 2024 and 2025, has outperformed most expectations and avoided the crash Western powers hoped to stoke by imposing the most onerous sanctions ever placed on a major economy.
But the strain of the war in Ukraine – the deadliest conflict in Europe since World War II – and double-digit interest rates slowed growth to just 1% last year. Putin said Wednesday the economy contracted 1.8% in the first two months of this year.
At the start of a Kremlin meeting with Russia's most powerful economic officials Wednesday, Putin said manufacturing, industrial production and construction were negative in the first two months compared to the same period last year.
Putin said the trajectory of the economy was below expectations and asked officials for detailed options on what can be done to remedy the situation.
Kremlin spokesperson Dmitry Peskov said Thursday that the closed part of Wednesday's meeting lasted several hours and included a free exchange of opinions.
"The members of the government's economic bloc have many proposals to activate the economy and give it greater momentum," Peskov told reporters. He declined to provide details.
Attendees included Prime Minister Mikhail Mishustin, Kremlin Deputy Chief of Staff Maxim Oreshkin, First Deputy Prime Minister Denis Manturov, Deputy Prime Minister Alexander Novak, Central Bank Governor Elvira Nabiullina and PSB bank CEO Piotr Fradkov.
Russia's $3.1 trillion economy contracted 1.4% in 2022 but grew 4.1% in 2023 and 4.9% in 2024. It grew only 1% last year, and Moscow's official forecast for this year is 1.3%.
While there were serious concerns in Moscow about the economic slowdown ahead of the Iran war, the biggest energy supply crisis in modern history is likely to bolster the oil-producing economy.
The International Monetary Fund (IMF) on Tuesday raised its forecast for Russia's economic growth this year to 1.1%, from 0.8% previously, due to higher oil and other commodity prices resulting from the Middle East crisis.
Still, according to Russian state statistics, the last quarterly contraction of such intensity as the first quarter of this year was likely in the first three months of 2023, when GDP declined by 0.8%.
In a speech on Thursday, Nabiullina, who has served as Putin's central bank chief since 2013, said the Russian economy is grappling with an acute labor shortage just as the Iran war stokes inflation risk.
"The peculiarity of the current situation is that for the first time in modern history, our economy has faced shortages or limits on labor," she said, adding that the shortage has created a new reality for both the state and for business. "Now we have the deterioration of external conditions, one could say, that is almost constant both in exports and imports."
At the same Moscow conference, Finance Minister Anton Siluanov, who was also present at the Kremlin meeting, said the government is considering an early return to the foreign currency market after the ruble strengthened this month.
A stronger ruble helps the central bank fight inflation but is negative for economic growth as it eats into exporting firms' profits, forcing them to cut investment, and makes Russian products less competitive.
