The Russian economy could slowly slow down due to high interest rates and may face difficulties in returning to growth trajectory, Alexander Ventiahin, the first deputy chief executive of Russia’s largest bank, said in an interview with Reuters.

“There is a risk of slowing the economy and we will not be able to get out of this recession, and further growth could be very restrained,” Ventiakin said in view of Russia’s main financial conference in St. Petersburg, which begins on Wednesday.

Low growth rates

Ventiakin predicted growth rate between 1% and 2% in 2025, under the most optimistic provision of the government, which is 2.5%.

“The wisdom and sensitivity of the regulatory authority and all economic and financial authorities are required to stop increasing inflation and prevent such a sharp decline in production,” Ventiakin added.

In addition, he said the main interest rate could be reduced to 17% from current 20%, as a lower interest rate was necessary for Russia to return to growth. He also argued that the ruble is overpriced right now.

The Central Bank increased the key rate to 21% last October, seeking to reduce inflation. As inflation began to decrease, it then carefully reduced the interest rate by 1 percentage point on June 6.

“My sense is that most likely, the central bank’s main interest rate could be about 17% by the end of this year. I do not think that the central bank will abruptly reduce the interest rate, as there is a risk that inflation will grow again, “Ventiakin said.

Ventiakin argued that only one key interest rate below 15%, a level equal to the EBITDA margin of many Sberbank customers, would help to resume investment and revitalize economic growth.

“A smart investor with such an EBITDA margin could undertake new projects. I believe that a interest rate below 15%, that is, in general, 12-14%, is a good level for the economy to start recovering, growing and moving forward, “he said.