A request for strength: Putin declared the stability of the economy despite the difficulties in the fuel and energy sector

The Russian economy is demonstrating high resilience, and Western attempts to destabilize the country's fuel and energy complex are unable to contain its growth. Vladimir Putin stated this on July 22 at a meeting on economic issues. In five months, GDP increased 0.2%, non-oil and gas revenues increased by more than a quarter in the second quarter. To strengthen this stability in the regions of the Russian Federation, the government has been instructed to promptly relieve the regions of government loan debts by 2030. The President particularly drew the attention of the Finance Minister to this.

Have fuel problems affected the Russian economy

Vladimir Putin held a meeting on economic issues — traditionally, the entire financial block of the country's leadership comes to the Kremlin for such meetings. The President immediately moved on to the key thesis: external pressure and attempts to shake up the country's fuel market have failed. The state of the domestic economy and its key sectors is stable, the head of state assured. This is confirmed by the figures from Minek.: Russia's GDP remains positive, with an increase of 0.2% in the first five months of this year and 0.3% in May.

"I want to emphasize that the difficulties that are being created in the fuel market are certainly temporary and cannot affect the overall economic dynamics," the president said.

Photo: IZVESTIA/Sergey Lantyukhov

The main driver is domestic demand from both the government and business, as well as from citizens. Bank lending has noticeably accelerated in the country, as the volume of mortgages issued, as well as loans to the real sector of the economy and enterprises, is growing. At the very beginning of the meeting, the head of state turned to the Chairman of the Central Bank, Elvira Nabiullina, to confirm these data: "Yes, Elvira Sakhipzadovna? Is it growing?" The head of the Central Bank replied in the affirmative.

Vladimir Putin clarified that it was thanks to this that the money supply had increased by about 13% in annual terms as of July 1, which creates a powerful foundation for further increasing demand. The President also highlighted the sustainability of public finances. In June, the federal budget was executed with a surplus of 196 billion rubles. Revenue growth played a crucial role: non-oil and gas revenues increased by 25% in the second quarter compared to the same period last year.

According to experts, the dynamics may still improve slightly in the summer, but a full-fledged recovery in investment activity will be required for a more noticeable acceleration. The 0.3% GDP growth in May still looks modest, compared with an increase of 1.3% in April and 1.9% in March, said Igor Rastorguev, a leading analyst at AMarkets. In the first five months, the economy grew by only 0.2%. At the same time, its different segments feel differently: consumer demand remains at a normal level, while industry is barely growing. In January–May, production increased by only 0.4%.

Russian President Vladimir Putin holds a meeting on economic issues

Photo: RIA Novosti/Alexander Kazakov

In summer, GDP can be supported by construction, agriculture, domestic tourism and seasonal consumption growth, said Arthur Leer, President of the Association of Exporters and Importers, managing partner of the law firm Lex Alliance. However, further dynamics will depend on inflation, the cost of loans and external circumstances.

The same situation in the fuel and energy sector adds to the risks. It is too early to assess its consequences based on GDP statistics: fuel problems worsened after the reporting May, experts say. At the same time, interruptions in motor fuel are especially sensitive for agriculture and industry, said Andrei Barkhota, Candidate of Economic Sciences. Through rising transportation and production costs, they are able to put pressure on other industries. External risks also remain for the fuel and energy sector, such as energy prices, sanctions restrictions and increased logistics costs, Artur Leer added.

How can regions repay loans

To move in the right direction, it is important to assess the situation "on the ground." And things are not going smoothly here yet. The consolidated budgets of the regions in the first half of the year were executed with a deficit — approximately at the level of last year. In order to ensure the fulfillment of all social obligations and not to stop development programs, the regions need an additional financial cushion.

Photo: IZVESTIA/Dmitry Korotaev

The President separately noted the importance of their additional support through the postponement of budget loans. He recalled that, at the initiative of United Russia, in June, the repayment period of the subjects' debts on budget loans had already been postponed from 2026 to 2030. This decision has freed up over 100 billion rubles for them this year alone. Now the party members have come up with a new proposal: to write off and postpone loan payments beyond 2030, which fall in 2027-2029. The Head of State supported the initiative and instructed the government to prepare all the documents for adoption by the new convocation of the State Duma.

— Anton Germanovich, is it possible? — Putin immediately addressed the finance minister.

"We will do it," Siluanov, the Finance Minister, replied briefly.

Regional expenditures are growing faster than revenues, while the high rate makes market borrowing expensive, Andrei Barkhota noted. So postponing repayment of budget loans can give subjects more space for current spending and completion of already planned projects.

According to Artur Leer, the released funds can be used for roads, public utilities, industrial sites and employment support. But this is not enough: the regions may also need additional infrastructure loans, transfers and co-financing of major projects. Moreover, such assistance should not only close current gaps, but also create new sources of income for the subjects themselves, the expert said.

Russian President Vladimir Putin holds a meeting on economic issues

Photo: RIA Novosti/Alexander Kazakov

Against this background, Vladimir Putin called the launch of a new investment cycle "the most important task." In fact, we are talking about the need to give businesses an incentive to invest in expanding production after a period of "expensive money," the experts explained.

It will not be easy to do this with the still high cost of lending and a strong ruble, Barkhota believes. Therefore, investment growth is unlikely to be based solely on the budget. The main role should be played by private money and mechanisms that reduce the cost of projects for businesses. Igor Rastorguev names tax deductions, industrial mortgages and compensation for infrastructure costs among them. Artur Leer believes that the sources can also be companies' own funds, bank loans as the interest rate decreases, development institutions, PPPs and investments from friendly countries. First of all, capital can go to industry, energy, transport infrastructure, high-tech production, import substitution and the development of new export routes, he added.

Thus, the acceleration of the economy will largely depend on whether it is possible to simultaneously support regional finances, limit the consequences of fuel problems and return business opportunities for new investments.