In a remarkable critique that drew considerable attention within Russia’s economic and political elite, one of the nation’s most influential financiers argued last week that Russian policymakers have become so narrowly preoccupied with the containment of inflation that they may be overlooking far more fundamental issues essential to the country’s long-term prosperity. According to him, the relentless obsession with stabilizing prices has blinded economic authorities to the urgent necessity of fostering sustained growth and development—a short-sightedness that, if left unaddressed, could threaten the foundation of Russia’s future.
German Gref, the respected Chief Executive Officer of Sberbank and the country’s former Minister of Economic Development from 2000 to 2007, delivered his pointed remarks before Russia’s State Council on Demographic and Family Policy. He underscored the peril of prioritizing monetary stability at the expense of broader socioeconomic advancement. “In recent months and years,” he lamented, “we have concentrated so intensely on combating inflation that we have, in many respects, lost sight of the primary driver of national vitality—economic growth itself.” Without a steadily expanding economy, Gref warned, no state can realistically resolve its pressing social issues, finance its public obligations, or lay the groundwork for genuine progress. In his words, without growth, “there will be nothing”—a stark reminder of the interdependence between macroeconomic expansion and social stability.
Gref further elaborated that all economic growth, regardless of context or geography, ultimately rests upon two interlinked pillars: the productivity of labor and the number of individuals productively employed. He noted that both these pillars are currently under dual strain in Russia, facing internal and external pressures. Under ideal conditions, he said, such limitations could be overcome through deliberate modernization—by embracing advanced technologies such as artificial intelligence, robotics, and automation, alongside a systematic investment in research, education, and scientific innovation. These transformative tools could dramatically enhance efficiency and offset demographic constraints. However, he cautioned, implementing such a technological leap demands vast financial resources and long-term planning—commitments that are increasingly difficult to fulfill in an environment characterized by scarce capital and high borrowing costs.
His assessment coincided with an announcement that Russia’s Central Bank had just reduced its key interest rate by 50 basis points to 16.5%, a modest easing after months of restrictive monetary policy. Yet, many business leaders contend that such an adjustment is insufficient. For months, the entrepreneurial sector has voiced growing frustration with the Central Bank’s stringent stance, arguing that the exceptionally high cost of borrowing suppresses lending, stifles corporate investment, and slows innovation. In defense, the Central Bank has maintained that keeping rates elevated is an unavoidable measure to control inflationary pressures, which averaged approximately 6.4% in the third quarter.
Against this tense backdrop, Gref presented a sobering projection: Russia’s economy, he forecast, is likely to experience only modest expansion—perhaps between 1% and 1.5% annually over the next two years—with growth in the current year potentially slumping to a mere 0.8%. That figure would mark a dramatic reversal from the comparatively robust 4.3% rise in GDP recorded during the previous year. His estimate reinforced growing anxiety among Russia’s economic elite that the nation is drifting toward stagnation.
Earlier this month, another prominent figure in the country’s business community voiced similar concerns, warning that Russia’s slowdown has reached a dangerous threshold. According to this assessment, the economy’s weakening momentum could undermine the state’s ability to sustain its expanding obligations—ranging from defense and security expenditures to a rising bill for social welfare programs—especially in light of the ongoing costs associated with military and political challenges.
Beyond monetary policy, the problem is compounded by a looming demographic crisis that threatens to erode Russia’s long-term growth potential. The nation faces an accelerating decline in its working-age population—a trend that Labor Minister Anton Kotyakov warned could create a shortfall of nearly 11 million workers by 2030. This demographic squeeze has been exacerbated by multiple sources: among them, battlefield casualties, along with a significant outflow of young, educated professionals emigrating abroad in search of stability and opportunity. The cumulative effect is a constriction of the labor force precisely when economic modernization demands an infusion of new talent.
In an effort to offset this shortage, Russia has steadily increased its reliance on migrant labor from Central Asia. Yet, Gref cautioned that such dependence often results in what he described as a process of “negative selection.” While the inflow of foreign workers fills immediate vacancies, a majority of these laborers possess limited qualifications, providing short-term relief but little contribution to productivity growth or innovation. Meanwhile, the country continues to lose its own skilled experts—engineers, IT professionals, and scientists—thus deepening the structural imbalance. To reverse this trend, Gref urged policymakers to launch an assertive campaign to attract qualified specialists from abroad, creating conditions and incentives that would encourage highly educated foreign graduates to build their careers within Russia. In his view, this issue transcends economics: it constitutes, he emphasized, “a matter of national security and even the survival of the country.”
Already, the demographic constraint is reshaping the economic landscape. With unemployment at an artificially low rate of around 2.1%, employers compete intensely for labor, fueling wage inflation and thereby intensifying overall price pressures. Businesses, struggling to fill vacancies, are increasingly hiring retired citizens and even teenagers to keep operations running—an adaptation that reflects both creativity and desperation within an economy heavily burdened by wartime disruptions and state-directed expenditures.
President Vladimir Putin has long recognized the strategic significance of population growth, framing it not merely as a social goal but as a civilizational imperative, essential for what he has termed the “ethnic survival” of the Russian people. Despite official incentives promoting larger families, the birthrate has continued to fall. Government statistics show that in 2024 Russia recorded only 1.22 million births—the lowest number since 1999—while deaths rose to 1.82 million. This widening gap underscores the gravity of the demographic decline, suggesting that unless corrective measures are introduced, the combined weight of slowing growth, shrinking labor supply, and persistent inflation could define Russia’s economic trajectory for years to come.
Sourse: https://www.businessinsider.com/russia-economy-inflation-population-demographic-crisis-labor-shortage-sberbank-2025-10
