Kremlin says Russian economy's difficulties are not critical

The Kremlin does not view the difficulties facing Russia's economy as critical and believes the overall situation remains stable, Kremlin spokesman Dmitry Peskov said on Thursday.

"The difficulties our economy is going through are well known to everyone. These difficulties are not of ‌a critical nature," ⁠Peskov ⁠told reporters.

"The government and the president regularly discuss them and understand what needs to be done to regulate and improve the situation. Macroeconomic stability is being fully maintained," he added.


Peskov's comments came after the central bank published the results of its monthly business survey on Wednesday showing a sharp deterioration in corporate sentiment.

The central bank's Business Climate Indicator (BCI) fell ⁠by 4.5 points ‌in July to minus 3.6, its lowest level since mid-2022. At the same time, companies' price expectations rose markedly after ⁠declining for five consecutive months.

Yevgeny Kogan, an investment banker and professor at Moscow's Higher School of Economics, noted that since records began in 2002 there had been only five months when the business activity indicator had deteriorated more rapidly. He said a move of the indicator into negative territory had historically been associated with economic crises.

Kogan also said that rising inflation expectations pointed to ‌a sharp increase in costs, amid fuel shortages resulting from an intensification of Ukrainian strikes against Russian oil refineries.

"As a result, the fuel crisis ⁠could both accelerate price growth and push the economy into recession. Such a situation is called stagflation," Kogan wrote on his Telegram channel.

"If the interest rate is increased to fight inflation, it could finish off the economy. If the rate is lowered to support business activity, price growth will accelerate further and become increasingly difficult to control. Something will have to be sacrificed," he said.