Economy decelerates in search of new growth drivers

RUSSIA ECONOMICS - In Brief 15 Aug 2025 by Evgeny Gavrilenkov

---

Rosstat reported that in 2H25, GDP grew by 1.1% y-o-y, and the figure was even less impressive than the shocking 1.4% y-o-y growth in 1Q25. It looks as though the economy grew by 1.2-1.3% y-o-y in 1H25 with diminishing chances of growing above 2.0% this year. Moreover, one cannot rule out a further deceleration in 2H25. Consumer demand appears to be suppressed by high interest rates and moderating nominal wage growth. External demand is also limited – not least due to an abnormally strong ruble that makes Russian products expensive for some foreign buyers. We have repeatedly mentioned in the past that a wider use of national currencies in Russia’s foreign trade transactions is one of the reasons behind the ruble’s strength (in addition to high interest rates and some other factors). The CBR recently reported that the use of “unfriendly currencies” in Russia’s foreign trade settlements amounted to less than 15% of total transactions in June. The share of ruble transactions reached 55.5% in the case of exports and slightly stayed above 50% in the case of import settlements (albeit it slightly decreased in June).The CBR’s balance of payments preliminary estimate showed that exports gradually decreased from $34.1 bln in April to $32.8 bln in June. Imports also decreased over the same months (from $24.9 bln to $23.6 bln). The trade balance hovered around $9.0 bln. In 1H25 the current account surplus amounted to $25.0 bln, while in June it shrank to 0.7% bln amid increased repatriation of profits by foreign investors. Still, the ruble remained strong and unaffected.The economy appears in search of new growth drivers as fueling domestic demand by budgetary spending appears ne...