Current interest rates demotivate businesses, investment in Russia may turn negative in Q3 or Q4 - economic development minister

ST. PETERSBURG. June 19 (Interfax) - Russian companies are reluctant to invest under tight monetary policy, current rates demotivate businesses, the forecast of 1.7% investment growth in 2025 is ambitious and investment dynamics may turn negative year-on-year in Q3 or Q4, Economic Development Minister Maxim Reshetnikov said during the session "Supply-Side Economics - Growth Strategy Amid Modern Challenges" at the 2025 St. Petersburg International Economic Forum (SPIEF 2025).

"This year, our expectations [for investment growth], despite strong Q1 figures which we still view as a significant deviation from the trend [8.7% growth in Q1], stand at 1.7%. I think this is quite an ambitious target [1.7% growth in 2025], given that most investment comes from companies' own funds, while we observe a substantial inflow of deposits, including from legal entities," Reshetnikov said.

"We understand that current interest rates not only discourage launching new projects with borrowed funds but also strongly deter businesses from investing their own money [in investments]," he said.

"Supply-side economics primarily means investment," he said. "Obviously, this now coincides with a period of tight monetary policy. Clearly, enterprises outside support programs are reluctant to invest," he said.

Commenting on strong Q1 data, Reshetnikov said, "The first quarter [saw a] mild winter, our construction sector surged, investment projects were completed, and the first quarter only accounts for 15% of annual weighting."

"With Q1 growth at 8.7% and the full-year forecast at 1.7%, this means we expect year-on-year investment declines in one of the quarters. Most likely in the third or fourth quarter," Reshetnikov said. He anticipates investment growth slowing into negative territory.