President of Russia Vladimir Putin: Mr Reshetnikov, we are scheduled to hold our traditional meeting on economic matters soon. I wanted to meet with you beforehand to hear your assessment and exchange views, so that you could brief me, or should I say fill me in, ahead of the upcoming meeting. Go ahead, please.
Minister of Economic Development Maxim Reshetnikov: Mr President, you have a very deep insight when it comes to economic matters, so I will just offer an update, while also perhaps raising some issues and delivering a progress report on the current objectives you have set for us.
If you don’t mind, I would like to begin by looking at the state of the economy from a longer-term perspective. Economic growth over the past three years amounted to 10 percent in real terms, which demonstrates a robust growth rate.
Vladimir Putin: This is the average for three years.
Maxim Reshetnikov: Yes, over a three-year period. As for the size of its economy, Russia ranks fourth in the world by purchasing power parity and is expected to retain this position in the near future. However, I would like to place a special emphasis on per capita GDP. On this diagram, the United States serves as a benchmark. What it shows is that we have narrowed the gap substantially since 2017. In 2017, Russia’s per capita GDP amounted to 43 percent of that of the United States, but by the end of 2025 it almost reached 56 percent. We have been narrowing this gap, while for many of our European neighbours this gap widened in most cases, which means that they were falling further behind. This demonstrates that Russia not only kept up but generated higher economic growth rates, including compared to the US economy. This data comes from the available international studies.
Therefore, I can understand the widespread concerns regarding the current economic situation, including among businesses. However, we must understand that the economy follows a cyclic development pattern, which means that periods of high growth rates – and we did have a period of high economic growth since there was a tangible expansion – are always followed by stabilisation and some structural adjustments and restructuring, which is what we are witnessing right now.
The next slide presents our key indicators from the past few years. As you can see, the Russian economy has grown 20 percent compared to 2016. Investment has grown significantly, by 50–52 percent, even considering a slight decrease last year. The investment-to-GDP ratio is currently over 23 percent – a level we have not seen before. Investment has indeed become a source of growth recently.
Of course, if we look at the performance of the processing industry, the growth rate, shown in the top left chart, is…
Vladimir Putin: Right. I want to take a closer look. I see a 5.3-percent increase in 2023–2025.
Maxim Reshetnikov: This is an average rate over three years, to provide a comparison with the previous period. Despite all the external challenges, the pressure of sanctions, the transformation and so on, thanks to the decisions taken and the accumulated potential, our economy is showing good results.
Of course, we realise the current situation. During the first two months, as you noticed, GDP did drop. In March, it rebounded. Although it may be premature to speak of a return to the old trajectory, we can see that the situation is stabilising.
Some other interesting trends include a significant decrease in the share of imports in GDP. This indicates that we are largely reliant on our own resources for our development. Our task is to turn it into a trend.
Of course, the key indicators such as GDP, investment, the processing industry always sound important. However, for people, real income is more significant. You always begin any conversation about the economy with this matter. Because sometimes economic growth does not translate into actual growth. That is not the case here though. In the past three years, real income has grown 26 percent. During the first quarter, despite a certain negative dynamic across the economy in general, real incomes continued to grow, showing an increase of 2.6 percent. The slower growth is primarily due to the fact that deposit income has slowed down. Real wages are growing – there was growth in January, February and, according to preliminary data, in March as well. Real wage growth is over 8 percent. This means that the labour market remains undersupplied. People are employed and they have opportunities to earn.
It is important to note that the strengthening of real incomes is also supported by lower inflation. Currently, the inflation rate stands at 5.6 percent, and it is a stable trend.
Vladimir Putin: Is this the actual rate as of May 4?
Maxim Reshetnikov: Yes, as of May 4. This is the latest data available. We will receive fresh statistics this week but for now, this is the figure. Subsequently, there is potential for relaxing monetary policy. It is a matter that we also discuss regularly with you but our focus is always on stimulating structural changes in the economy, to ensure that, regardless of the economic cycle, we can fully realise the growth potential of our economy.
To this end, we have now formulated economic development scenarios that will define the next three-year period. They have been reviewed and approved by the Government. Overall, the forecast is fairly conservative, including with regard to oil prices. As already reported to you, we are basing our projections on an oil price of $50 per barrel over the next three years; for this year, the estimate stands at $59, which is understandable given the current market environment. The assessments are deliberately conservative.
Accordingly, we expect the ruble exchange rate to be somewhat stronger than previously forecast. In 2026, we expect GDP growth of 0.4 percent, with gradual acceleration to 2.4 percent by 2029.
The primary sources of growth will primarily be household consumption, continued growth in real incomes and a gradual normalisation of the savings rate. At present, a very large share of people’s incomes is being channelled into savings, including bank deposits. The savings rate currently exceeds 16 percent, which is, of course, extremely high. We expect it to stabilise at around 11 percent.
As for investment, we expect a recovery beginning next year. On inflation, we forecast a continued slowdown and a return to the target level set by the Bank of Russia.
Overall, we have also discussed these scenarios extensively with the Bank of Russia. They will form the basis for drafting the federal budget. The budget cycle for the next three-year period is already beginning. At the same time, it is important to understand that the budget parameters themselves will also affect the pace of economic development. Accordingly, the smaller the budget deficit – and the Government is currently working very intensively on this – the more room there will be for reducing interest rates, the lower the key rate in the economy will be, and therefore the greater the opportunities for economic growth.
Vladimir Putin: Yes, you mentioned growth in real incomes. What is the figure at the moment?
Maxim Reshetnikov: For the first quarter, it stands at 2.6 percent.
Vladimir Putin: 2.6 percent? Is that real disposable income?
Maxim Reshetnikov: Yes, real disposable income.
Vladimir Putin: I see. 2.6 percent. And you think it will decline by one percentage point by the end of the year?
Maxim Reshetnikov: Yes, there will be an adjustment. People are currently receiving substantial interest income from deposits, and since rates are coming down… Wages are fine, and social payments are, of course, stable.
Vladimir Putin: Wages will continue to grow.
Maxim Reshetnikov: Yes, wages will continue to grow because…
Vladimir Putin: There are labour shortages.
Maxim Reshetnikov: Mr President, I would like to report on the implementation of the plan for structural changes in the economy.
Vladimir Putin: You believe the inflation target will already be reached next year?
Maxim Reshetnikov: The Bank of Russia is guiding us towards that. Moreover, the Bank of Russia has indeed taken the necessary measures. From our point of view, the differentiation in interest rates is substantial. We are seeing a slowdown in lending growth and in money supply growth. Naturally, when we speak with businesses, this is perceived quite acutely in the short term, because it effectively means a contraction in demand, which many sectors are feeling, along with the strong exchange rate. But strategically, for the economy to grow, low interest rates are essential. On this, we agree with the Bank of Russia. Further normalisation of budgetary conditions will also be required. We understand that as well, and these are issues we report to you on regularly.
Vladimir Putin: Good.
Maxim Reshetnikov: If I may, Mr President, I would also like to mention several measures the Government is taking.
The first issue is the labour market. Following your instruction, we have developed productivity growth programmes for all 17 major sectors of the economy, including the social sphere. Altogether, these programmes cover 55 million workers. Our goal is to offset labour demand equivalent to 3 million people through various efficiency measures. I realise the terminology sounds somewhat technical, but what we mean is not reducing headcount. In many cases, people remain employed within the same organisations or move into different roles. But it allows the economy to grow while using the same labour resources. This growth, however, does not happen on its own. It involves the introduction of lean manufacturing, robotisation and the wider use of artificial intelligence.
If we speak, for example, about the social sphere, this also involves digitalisation, as well as, in some cases, the consolidation of public institutions and the creation of larger holdings. In education, for instance, such an idea is currently being considered. This makes it possible to reduce administrative and managerial overheads and direct more resources towards the salaries of core personnel, such as doctors and teachers.
There are also sector-specific issues. In every area, we identify zones of low productivity. For example, in the housing and utilities sector, the least productive companies are generally small firms operating a single boiler house or small management companies. At the same time, it is striking that they combine low productivity with poor-quality services. They lack emergency crews, face staff shortages, and so on. Therefore, wherever possible, together with the regions we are cautiously encouraging the formation of larger and more responsible structures capable of coping with these tasks.
The same applies to retail trade, where we also see significant potential for releasing labour resources. We have analysed every sector in detail together with our colleagues, and our main focus now is, of course, the implementation of all these programmes.
Next, I would like to draw attention to the performance of the small and medium-sized business sector, which is currently facing difficulties. On the one hand, employment indicators are positive, as is the number of SMEs; however, we understand that the tax changes mean businesses need time to adapt.
Mr President, in accordance with your instruction following the Direct Line – you may recall the appeal from the Mashenka bakery – amendments were introduced to the legislation, and now small and medium-sized enterprises can benefit from VAT relief in public catering and insurance premium relief in manufacturing without taking last year’s income into account. As you recall, the issue was that they had to demonstrate last year’s income, which prevented them from switching to a more preferential regime and adapting this year. We reported this to you, you supported it, and now the amendments have been adopted at the initiative of the Ministry of Finance; we worked through them together with colleagues. This flexibility is now available to entrepreneurs, and we are facilitating its implementation.
The second point that concerns us in the SME sector is the following: when interest rates are high, major companies are always tempted to delay payments, especially to small and medium-sized businesses, in order to make use of the money and earn a return. Therefore, we have now intensified the work of the task force on non-payments, and we are collecting all complaints from small and medium-sized businesses together with the Federal Antimonopoly Service and the OPORA Russia public association, summoning corporations and reviewing their cases. In addition, the Government has supported us and instructed all corporations to pay special attention to this matter. The problem often lies not with the parent companies of corporations but, as a rule, with their subsidiaries and second-tier subsidiaries. At the second or third tier, where there is a great deal of decentralisation, they begin to act in bad faith.
We are also separately assisting small businesses in working with digital platforms and promoting the fine-tuning of efficiency mechanisms.
A separate issue for us in the SME sector, despite budget constraints, is, of course, involving veterans of the special military operation who are returning in the sphere of small business. Many return with ideas, energy, and a desire to act, and it is very important to support them. The issue here is more about mentors – providing guidance and assistance; we are fine-tuning the support instruments, such as grants and similar measures. The amounts are small, but the social effects – and, frankly speaking, the economic effects as well – are considerable, because an entrepreneur is, above all, a source of energy. When the young men return, they have a great deal of energy, and we need to channel it effectively. Therefore, we are trying to consolidate all issues in this area.
Vladimir Putin: The Defenders of the Fatherland Foundation is also working on this issue.
Maxim Reshetnikov: Yes, together with them and the My Business centres. Indeed, we have a single team there. In the regions, this consolidation is progressing very well; they know all the lads personally.
Finally, if I may, I would like to touch on one more aspect of the business environment. In line with your instructions, a National Model of Targeted Conditions for Doing Business has been developed. We will shortly provide a separate report on all areas, as you have requested.
This has been a very useful piece of work. We have been working on the business environment for 20 years, and we have made progress each time. We have now reached a very good stage. We have brought together all the requests and potential opportunities from businesses, and many initiatives are already being implemented. For example, the amendments to the Labour Code, which you supported at the time, allowing people to work longer hours for higher wages and corporations to cover the costs, have passed their first reading and are now before the State Duma for a second reading. The same applies to amendments to the Bankruptcy Law. As a result, the law that was once stalled is now being actively taken forward.
We also have proposals to amend the Civil Code, Mr President, to address the so-called “take-or-pay” principle. We need this for technology as well, in order to balance the responsibilities of suppliers and contractors. More broadly, there is a fairly long list of issues, and we are working through them.
Separately, we began addressing the investment climate in the regions, but not by focusing on the best-performing ones, as those have always made progress. Together with Svetlana Chupsheva and the Agency for Strategic Initiatives, we examined 30 regions that, shall we say, have not shown much progress over the years. These include a number of industrial regions, and some good ones – I would not name names. We have spoken with the governors and drawn up roadmaps. Our goal is not only to improve conditions in Moscow, Tatarstan, and so on, but to improve them everywhere. That is where our focus lies now, and we are working together on this. I expect we will have some results to show by the St Petersburg Forum.
Mr President, we have an ambitious agenda in terms of structural reforms. As for the digital platform economy, we have adopted the relevant law and are moving forward, because the platform economy comprises a million companies that are operating but they are small and depend on a dozen platforms that are super-large. That is why we need to balance them. We have done a great deal to call these platforms to account. Moreover, they are rapidly growing, which is probably why they are not always aware of their huge influence on the national economy. That is why we are working with them carefully, focusing on best practices rather than bans. We have a relevant law that allows us to achieve a great deal. So, I would like to thank you for your support regarding this. There are also other issues on which we are working and trying to implement.
Vladimir Putin: Does this include the platforms you have mentioned?
Maxim Reshetnikov: Yes, it does.
Vladimir Putin: Does this include the right of sellers to reject the practice of discounts at the sellers’ expense?
Maxim Reshetnikov: Mr President, you have touched on the most sensitive issue that is at the very centre of our discussions right now. However, we have convinced the platforms, which have understood our point, that it would be wrong to disrupt small businesses’ marketing strategies with seller-funded discounts. Businesses agree with this view. Therefore, I believe that we will enshrine this provision in a law at the next stage.
There are several other issues. In particular, businesses have drawn our attention to different types of discounts, for example, some for Chinese companies that trade in Russia and others for Russian companies. In our opinion, this is unacceptable. We are not against them expanding their imports and ensuring competition, but it must be fair competition in our market, which must not be swamped with cheap imports that do not comply with certain tyre requirements. Everyone is in agreement on that.
Vladimir Putin: Mr Reshetnikov, if I understand you correctly, there are some positive macroeconomic trends. Our annual inflation is currently 5.6 percent, and we can see certain positive trends in our economic growth rates, even despite the negative elements reported in the first quarter.
Maxim Reshetnikov: Yes, Mr President, you are absolutely right. Our inflation rate is decreasing, and the 5.6 percent rate is based on the latest statistics as of early May. You are also absolutely right about the growth rate. Although it contracted by 0.3 percent in the first quarter, we reported 1.8 percent growth in March year on year, and we hope that this trend will strengthen in April and May.
Vladimir Putin: Thank you.
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