Putin Says ‘Deliberately’ Curbing Economic Growth

Russian President Vladimir Putin said on Thursday that Russia is intentionally slowing its economic growth, downplaying concerns about a downturn and claiming the economy is far from recession.

“As for the decline from more than four percent gross domestic product (GDP) growth, this is not a decline at all. It is a deliberate action, a slowdown in growth rates in exchange for curbing inflation and maintaining macroeconomic stability,” Putin said in a televised meeting with lawmakers, according to Russian state media.

Russia’s GDP growth is expected to slow to around 1% from 4.3% last year, while inflation has exceeded 8%.

“I think that a recession is still a long way off, and the labor market reflects this,” Putin added.

This echoed remarks by Central Bank Governor Elvira Nabiullina, who said at the Moscow Financial Forum on Sept. 18 that “we shouldn’t confuse a recession, which I agree is associated with very negative phenomena, with an economic slowdown.”

“Yes, there is an economic slowdown, but there is no recession. And even when people talk about a technical recession, they mean the economy has been declining for two consecutive quarters. We haven’t seen that,” Nabiullina said in quotes cited by Russian state media.

However, Reuters reported that a Russian Central Bank report earlier in September showed two consecutive quarters of GDP decline in quarter-on-quarter terms, aligning with the common definition of a technical recession.

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It also came in conflict with claims by Russian Economic Minister Maxim Reshetnikov, who said in June that Russia was “on the verge of recession” while speaking at the St. Petersburg International Economic Forum.

Earlier on Thursday, Reuters reported that the Russian government was considering hiking the value-added tax (VAT) rate in order to keep the budget deficit under control and preserve its reserves, citing four unnamed sources.

Following initial reports by The Bell, the agency said that the Kremlin was mulling raising the VAT rate from 20% to 22% in measures that could be introduced in the 2026 budget.

If true, this would contradict Putin’s public assurances that no further tax increases are planned, according to Reuters.

“How can the deficit be reduced while adhering to the budget rule? Only by raising taxes, because there’s hardly anything left to cut, either military spending or social spending,” one source close to the Kremlin told the agency.

In May, the government tripled its federal budget deficit estimate to 1.7% of GDP, though an unnamed official quoted by state media this month said that it is now set to exceed that target, according to Reuters.

Government spending has been a key driver of economic growth in Russia, where 40% of revenues are now splashed on defense and security.