Russian bank chief issues dire economic warning

The head of one of the largest banks in Russia has said that the country’s economy is overheating because of the war in Ukraine.

Since Moscow’s invasion of Ukraine in February 2022, the Russian economy has been hit by sanctions imposed on it by the global community. Western countries were the hardest hit by sanctions, especially on Russia’s commercial industry. Despite this, increased activities during the war caused the Russian economy to grow by 3.6% last year.

However, the CEO of Russia’s largest bank, Sberbank, has now said that this growth is a sign of an overheated economy. Herman Gref, speaking at the Federation Council in the Russian legislature on June 4, is reported to have said: “Our economy is definitely and very overheated.

“We’ve never had such high capacity utilization in our history. At 84 percent – that’s a threshold where it’s simply impossible to go over. And huge funds go into the economy through the budget stimulus.”

Gref also stressed the need for Russia to develop greater countermeasures against artificial intelligence, saying: “It is only possible to effectively counter such attacks when we have a higher level of such technologies.

“Many cybercrimes are now being carried out using ‘an army’. An ‘army’ of Ukraine, an ‘army’ of the US is now working against us, we see this in full force.

Gref previously served as Economy and Trade Minister in the Russian cabinet before leaving in 2007 when he was elected president of state-owned Sberbank. He also remains a trustee at the World Economic Forum.

Despite international condemnation of Russia’s actions in Ukraine and the significant impact of sanctions on the economy, Russia has maintained growth by generating demand for military goods and services.

However, other key areas of the economy are feeling the strain. On June 5, Russia’s Ministry of Economic Development released figures showing that annual inflation had risen to 8.17 percent. In March 2023, Federation Council Vice President Galina Karelova claimed that over 8.4 million jobs had been put at risk due to international pressure, particularly those in international companies based in the West.

It is not the first time that major stakeholders in the Russian economy have issued such warnings. In December last year, central bank governor Elvira Nabiullina made a similar prediction, saying: “The economy is expanding so fast because it is using almost all available resources. Stubbornly high inflation is evidence that the economy has deviated from its potential and lacks the capacity to cope with the growing demand”.

Newsweek reached out to the Kremlin for comment, but did not receive an immediate response.