Russia economy in meltdown as Moscow rocked by record-high 21% interest rates

Putin has set a target of 3% growth in the economy this year. (Image: Getty)

A senior Russian figure has pleaded with the country’s central bank to reduce interest rates as the economy continues to flounder. Economy minister Maxim Reshetnikov called on Russia's Central Bank governor, Elvira Nabiullina, to ease monetary policy so that the country can meet President Vladimir Putin's target of 3% growth.

Interest rates are at a record high of 21% and have been maintained at that level since October 2024. That is despite Nabiullina facing intense pressure from politicians and oligarchs to reduce rates, which they say hamper the Russian war effort. Reshetnikov’s comments come in advance of a review of the rate on June 6, when many experts predict that the current rate will be maintained.

Russia's Central Bank governor Elvira Nabiullina has resisted calls to reduce interest rates. (Image: Getty)

Reshetnikov said: "The current task is to navigate the cooling-off period. We are counting on a timely easing of monetary policy to maintain the targeted 3% growth rate outlined by the president in the future.

Experts expect the country to fail in its bid to achieve 3% growth, with economists believing that figures of around 1.5% growth are more likely.

The current Russian interest rate is at its highest rate since the early 2000s and aims to tackle surging inflation, which dropped to 6.2% in April, down from 10.7% in January, according to Russian official data.

Such is the dire state of the Russian economy that some experts believe the country is heading towards recession as Putin continues to align output around the war effort.

The Russian economy has been hit hard by the response to its invasion of Ukraine. (Image: Getty)

Alexander Kolyandr, a nonresident senior fellow at the Centre for European Policy Analysis, said the economy could dip into recession within weeks.

He said: “The Russian economy, which as recently as the end of last year was showing annual growth of 4.5%, faces not just a slowdown, but a likely recession.

"The latest official data suggests the economy could dip into negative growth as early as this summer."

He noted that manufacturing industries - including those in the defence sector - were losing momentum.

Writing in the independent Russian publication The Bell, he noted: "In chemical production growth stalls, but the explosives' share of the total climbs.

Western sanctions, imposed in the wake of the 2022 invasion, continue to hit the country, with the nation losing as much as £330 billion in energy revenues since the war started.