Putin says war in Ukraine is not killing Russia's economy

By Vladimir Soldatkin and Guy Faulconbridge

ST PETERSBURG, Russia, June 20 (Reuters) - Russian President Vladimir Putin on Friday dismissed claims the war in Ukraine is devastating the Russian economy, citing continued growth, low debt and economic diversification as signs of resilience, while business leaders voiced concern about the economy's health.

Speaking at the closing session of the Saint Petersburg Economic Forum, Putin responded to a moderator’s statement that credible reports suggest the war is “killing” the Russian economy. “As a well-known writer once said: ‘The reports of my death are greatly exaggerated,’” Putin said, quoting Mark Twain.

Putin said 43% of Russia’s GDP is now unrelated to the energy or defence sectors, underscoring efforts to diversify the economy.

The three-day forum featured intense debate over the risks of economic stagnation. Inflation remains high at 9.59% annually, more than double the central bank’s 4% target, but it has been gradually easing since late April, according to the economy ministry.

In October, the Bank of Russia raised its key interest rate to its highest level since the early 2000s to combat inflation. Earlier this month, it cut the rate by one percentage point to 20%.

But the Kremlin has criticised the move as insufficient, warning that the economy could cool too rapidly after two years of war-driven growth.

“Our most important task is to ensure the economy’s transition to a balanced growth trajectory,” Putin said in a keynote address. He defined balanced growth as moderate inflation, low unemployment and sustained economic momentum.

"At the same time, some specialists and experts point to the risks of stagnation and even recession. This should not be allowed under any circumstances," Putin said.

Striking a more pessimistic tone, Economy Minister Maxim Reshetnikov warned on Thursday that Russia is teetering on the edge of a recession. He said future monetary policy decisions will determine whether the country avoids a downturn.

Central Bank Governor Elvira Nabiullina, who has led the institution through multiple crises since 2013, has faced criticism over high interest rates and currency volatility. She remains in her post with Putin's personal support .

Deputy Prime Minister Alexander Novak said: "It's time to cut the rate and start heating up the economy.

Demand for credit is weak, said German Gref, CEO of Russia's largest lender, Sberbank SBER.MM, and called for faster rate cuts.

"It is especially worrying that we, as the largest bank, which finances ... almost 60% of all investment projects in the country, have not financed a single new project since the new year," Gref said on Friday.

Alexey Mordashov, majority shareholder of steelmaker Severstal, warned of a looming credit crisis and rising bankruptcies. He noted that steel consumption fell 14% in the first five months of 2025 compared to the same period last year.

"This cooling is a serious problem right now,” Mordashov said. “Continuing with the current monetary policy could worsen these negative consequences.”