In the first five months of this year, the gross domestic product (GDP) increased by only 0.2 percent, Putin said, citing data from the Russian statistical service (“Rosstat”). This is 5 times less than last year, when the economy grew by 1 percent, and 20 times slower than in 2023–2024, when economic growth annually exceeded 4 percent under conditions of military uplift, according to “The Moscow Times”.
Putin demands investment
According to V. Putin, investments are needed to accelerate growth. “Currently, the most important task is to start a new investment cycle, to promote structural changes in the country’s economy,” the president said.
However, for now, the largest state-owned enterprises, as well as companies belonging to Russia’s wealthiest businessmen, are rapidly reducing capital investments, complaining about falling profits, expensive loans, and the “freezing” of economic activity.
Huge drop in investments
According to Rosstat data, investments fell by 14.3 percent in the first quarter – a record drop since 2009.
“Essentially, the decline was caused by investment restrictions by the largest group of companies,” Deputy Prime Minister Alexander Novak explained to V. Putin in June. According to his calculations, the largest companies reduced investments by 307 billion rubles.
For example, Novatek invested almost twice less in the Arctic LNG 2 plant than a year ago: 46 billion rubles, compared to 87 billion.
“The reasons here are clear – external restrictions,” A. Novak reported. Gazprom also experienced a decline: 376 billion rubles, compared to 411 billion last year. This is just the beginning: this year its investment program amounts to half a trillion rubles, which is almost a third (31.9 percent) less than last year. “Russian Railways” is reducing investments for the second year in a row; this year they will be half of what they were in 2024.
Rosatom’s program will be almost half of last year’s – more than 900 billion rubles, compared to 1.66 trillion, warned the head of the state corporation, Alexey Likhachev. On the day V. Putin spoke at the St. Petersburg International Economic Forum, Russia’s wealthiest businessman, Alexey Mordashov, announced that his Severstal had reduced its investment program for this year by a quarter.
According to V. Putin, despite attacks on oil refineries, which caused a fuel crisis, the economy remains “stable.” However, businesses lack the opportunities, and often the desire, to invest.
Businessman Roman Trotsenko cited the high base interest rate as the main obstacle at the St. Petersburg International Economic Forum, which reduces demand and makes loans inaccessible.
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Russia nationalized private companies worth 4 trillion rubles
Foreign investments will not come to Russia, even China does not invest money in the Russian economy, and domestic investments are hindered by the country’s high risk, sanctions, and lack of property rights guarantees, notes economist Igor Lipsits, quoted by “The Moscow Times”.
“You have to be completely insane to invest money in private business in Russia now,” when it can be taken away at any time, explains I. Lipsits. According to the Prosecutor General’s Office, since the beginning of the war, the authorities have nationalized private companies worth 4 trillion rubles.
By the way, companies’ own funds, which were the main source of investment, are also decreasing: their profits are shrinking (10.3 percent in four months).
“Unfortunately, we don’t have enough of our own funds to start any investment projects,” complained Rostec head Sergey Chemezov to Prime Minister Mikhail Mishustin.
“We are trying to improve new models, we recently started producing bevel gears. This means that, of course, we are continuing those projects in which the main amount has already been invested. We are not planning new projects,” said Konstantin Babkin, owner of Rostselmash.
This is a typical situation: a survey of more than 10,000 companies conducted by the Central Bank of Russia showed that already last year, investments in all industries were mainly aimed at maintaining production capacities, and high activity remained mostly in those sectors with state demand or state support, as well as those focused on import substitution. However, this source has dried up: over six months, the budget deficit reached almost 6 trillion rubles, and opportunities to support the economy are constantly decreasing.
It’s not just about money. The desire for investment is suppressed by complete uncertainty. Hopes for an end to the war have not materialized, war expenditures are growing, despite promises, taxes have been increased for two years in a row – also despite V. Putin’s and Finance Minister Anton Siluanov’s promises not to change them until 2030, and assets are regularly confiscated from businessmen.
“Investments are mostly about trust and mood… There are colder times, there are warmer times, but business forgets nothing,” mused Minister of Economic Development Maxim Reshetnikov.
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