Russia's Economy Reaches a Fork in the Road: Inside Expert RA's Two-Scenario Forecast for 2025

In mid-April 2025, the rating agency Expert RA published its macroeconomic forecast for the year, and the framing chosen by the business weekly Expert was hard to mistake: the Russian economy, its correspondent Yakov Timakov wrote on 17 April, is approaching a fork in the road. After two years in which activity ran hot, supported by budget spending, a credit boom and an exceptionally tight labour market, the engine of growth has begun to cool - and the question for the remainder of 2025 is no longer whether the economy will slow down, but how deep that slowdown will go and whether monetary policy will loosen in time to cushion it. Expert RA's answer comes in the form of two scenarios - a baseline it calls 'reasonable sufficiency' and an alternative it labels 'additional shock' - separated less by assumptions about the world than by assumptions about the Bank of Russia itself.

The forecast is notable not only for its numbers but for its diagnosis. According to Anton Tabakh, managing director for macroeconomic analysis at Expert RA and the author of the projection, overheating in the Russian economy has been replaced by what he terms an 'overbend': economic activity has significantly slowed, credit activity is declining, and the sharpness of the labour shortage - the defining constraint of the previous two years - is fading. That is a striking shift in vocabulary. As recently as the end of 2024 the debate in Moscow was about how far the economy had run beyond its capacity limits; by the spring of 2025 the agency's analysts were instead cataloguing the sectors where demand was contracting fastest and asking whether the central bank's medicine had been administered in too large a dose.

How the economy arrived at the fork

Expert RA identifies two domestic forces that pushed the economy towards the bifurcation: the tight policy of the Bank of Russia and the tax reform that took effect at the start of 2025. The monetary side is well documented. The central bank's repeated rate hikes, which by the end of 2024 had lifted the key rate to 21%, slowed lending across the board and choked off growth of the mortgage portfolio in particular, especially once subsidised programmes were restricted and macroprudential limits were tightened. The fiscal side worked more subtly but, in the agency's telling, no less powerfully. The introduction of a multi-step progressive personal income tax scale and the higher profit tax prompted businesses to shift economic activity and employee payments forward - from early 2025 into late 2024. Advance payments under state procurement contracts accelerated over the same period. The combined effect was to borrow demand from the first half of 2025 in order to flatter the second half of 2024, and Expert RA expects business activity to weaken over the course of the current year as that hangover works through the system, with the slowdown becoming fully visible in many sectors in the coming months.

The external backdrop, meanwhile, has become less comfortable rather than more. The agency points to a high probability of global tariff and trade wars - unpredictable United States tariff policy has already increased uncertainty for the world economy - and it does not expect any significant relaxation of the sanctions regime or meaningful reduction in sanctions-related costs for Russian exporters. The foreign-trade environment facing Russia in 2025, in other words, combines a possible blow to commodity prices and export demand with a currency that the agency believes is currently stronger than its fundamentals justify.

One further piece of context matters for understanding the mood in which the forecast was written. In its April regional bulletin 'What Trends Are Saying', the Bank of Russia itself concluded that the economy is exiting a phase of strong overheating: January-February data and February-March survey indicators pointed to continued growth, but at a noticeably lower pace than in previous quarters, with seasonally adjusted first-quarter GDP still expected to exceed the level of the third quarter of 2024. The regulator and the rating agency, in short, agree on the direction of travel. They differ on the speed.

Scenario one: 'reasonable sufficiency'

The baseline scenario, whose name borrows a military doctrine's logic of doing enough but no more, sketches a managed descent. Its central parameters are:

• Inflation slows to 6.5-7% by the end of 2025 - below the Bank of Russia's own medium-term forecast of 7-8%, dated 14 February, and marginally below the 7% expected by analysts in the regulator's April survey.
• The key rate declines to 18-19% by December, against the central bank's stated average range for the year of 19-22% and the 20% April analyst consensus.
• GDP grows by around 1.5%, within but slightly below the Bank of Russia's 1-2% corridor.
• Investment growth slows sharply to 2.1-3%, with the main driver remaining state support for large projects - above all the modernisation of the transport system and the development of the digital economy - rather than private capital.
• The ruble averages about 96 per dollar over the year, with very wide fluctuations around that mean.

The sequencing of monetary easing is a distinctive feature of this scenario. Expert RA expects signals of a move away from tightness to begin at the Bank of Russia's meeting on 25 April, with clearer signals of easing emerging by June, but actual rate cuts only from September - and then conditional on the absence of any indications of a sharper economic decline than currently projected. The agency describes the expected slowdown as 'rather inertial': it has momentum, and reversing it quickly would require policy to move early and decisively, which the forecast does not assume.

There is also a more favourable variant embedded within the baseline. If the economy slows faster than expected and sanctions pressure partially weakens, Expert RA allows that the key rate could fall as far as 16% and inflation as far as 6% by year-end. But the agency itself considers this variant unlikely, attaching a firm condition to it: budget spending must not significantly exceed the approved levels. Should spending overshoot, the forecasters warn, inflation could receive a fresh impulse within just two to three months - a reminder of how quickly fiscal looseness can undo monetary discipline in an economy already running near its supply constraints.

Scenario two: 'additional shock'

The alternative scenario is, in the agency's telling, a story that looked considerably more probable in December 2024 than it does now. At that point, with inflation running hot and the central bank still in hiking mode, the 'additional shock' path - renewed monetary tightening layered onto an already tight policy stance - appeared a live risk. By February and March 2025, however, the discussion around the key-rate decisions had, in Tabakh's words, reduced the priority of this scenario: it remained 'on the table' but was no longer the favourite. The author of the forecast says he hopes that by June the probability of a rate hike will have disappeared even as a hypothetical scenario.

If it does materialise, the parameters are stark:

1. The key rate remains at 21% through December 2025 - no easing at any point in the year.
2. Economic growth falls close to zero.
3. Private investment inflow becomes limited, and in sectors not prioritised by the budget, investment turns negative.
4. The decline in activity reduces demand in the labour market, unwinding what remains of the workforce shortage that has driven wage growth.

The scenario's mechanics are worth unpacking because they are counter-intuitive. The main prerequisite for the shock path is renewed inflationary pressure, and Expert RA lists five possible triggers: restoration of the credit impulse; higher government spending; rising inflation expectations among businesses and households; reduced uncertainty in the global economy; and - in a twist that captures the strangeness of the current conjuncture - a weakening of the sanctions regime. The logic in the last two cases is that optimism itself can be inflationary: increased optimism and high business activity could be interpreted by the Bank of Russia as a reason to strengthen monetary tightening rather than ease it. A central bank that fears overheating reads good news as a warning sign.

The ruble: three-digit sums return

The currency forecast is among the most concrete elements of Expert RA's projection, and its headline claim is that the dollar will again be counted in three-digit sums. The agency expects pressure on the ruble in the coming months as the foreign-trade surplus declines, forecasting an average annual rate of about 96 rubles per dollar with very wide fluctuations around that average, and it does not exclude that in the fourth quarter of 2025 the dollar will exceed 100 rubles. Neither does it expect the Bank of Russia to intervene actively in the foreign-exchange market to defend any particular level; currency purchases for the National Wealth Fund are projected to remain insignificant relative to total market volume.

Crucially, Expert RA regards the ruble's strength in the first quarter of 2025 as technical rather than fundamental. Tabakh attributes it to a conjuncture of temporary factors: the closing of sanctions-blocked positions on the Moscow Exchange; operations of large non-financial companies; tax-related demand for rubles generated by the new tax schedule; and positive expectations of reduced geopolitical risk. None of these, in the agency's view, reflects an improvement in the underlying trade and financial flows. A blow to commodity prices and export demand, Tabakh argues, will likely start the reverse countdown for the ruble.

Grigory Zhirnov, a researcher at the macrostructural modelling laboratory of HSE University, offers a more cautious - and, for the currency, more constructive - view. His baseline scenario assumes a moderately positive external environment and a slow return to 90 rubles per dollar by the end of 2025 or early 2026, though he stresses that the ruble can be volatile as the geopolitical information background changes and financial flows reverse direction. Zhirnov also endorses the broader thrust of the Expert RA projection: slower GDP growth, he says, is inevitable given current real interest rates and the macroprudential credit-restraint measures, and a noticeable cooling of domestic demand is only a matter of time.

Construction at the epicentre, consumers still spending

The sectoral map of the slowdown is uneven, and Expert RA is explicit about where the damage concentrates. Construction is the epicentre under any scenario. High interest rates have sharply reduced the launch of new projects, and restrictions on subsidised mortgage programmes have compounded the effect. Developers, the agency notes, can respond by reducing sales volumes without lowering prices - a strategy that protects margins but passes the pain upstream. Expert RA expects the main damage to fall not on developers themselves but on suppliers of construction materials and equipment, whose order books thin out before any headline developer failure occurs.

Tabakh identifies two further early casualties: the production of durable goods, where credit dependence is high and purchase decisions are easily deferred, and raw-material exports, which suffer for as long as the ruble remains relatively expensive, squeezing the currency-denominated margins of commodity producers. At the opposite end of the spectrum, the agency expects the greatest growth in the consumer sector, in services and in segments receiving direct budget financing. Fiscal flows, in other words, are reallocating growth within the economy even as the aggregate pace slows.

The labour market sits somewhere in between. The sharpness of the labour shortage is fading - a development that eases wage-push inflation but also signals that businesses are scaling back hiring plans. Under the shock scenario, Expert RA warns, the economic decline could reduce demand for labour outright. And on the fiscal side, the agency sees no stress: budget stability is not threatened, and growth in state-budget revenues significantly exceeds inflation, giving the government room - at least for now - to sustain the spending that underwrites the budget-funded segments.

Liquidity turns: what the experts make of the forecast

The economists quoted in the Expert article broadly accept the agency's framing while quarrelling with parts of it. Sofya Donetsk, chief economist at T-Investments, calls the forecast 'quite realistic' and agrees that the phase of economic overheating has ended, with the economy now moving towards cooling. Her expectations run slightly ahead of Expert RA's calendar: she expects the peak of the cooling to be overcome in the second half of the year, but she also draws a sobering forward conclusion - if the described scenarios are accurate, economic growth in 2026 could be much worse than in 2025. Once started, she notes, the credit slowdown could last between one and one-and-a-half years, which would push much of the adjustment burden into the following year.

Svetlana Frumina, head of the Department of World Financial Markets and Fintech at the Plekhanov Russian University of Economics, supplies the most pointed critique of the inflation target. She calls the 6.5% forecast 'debatable' and difficult to achieve amid continuing destabilisation of the global economic climate, and she flags exchange-rate volatility as a direct threat to the disinflation path. Frumina also reads structural significance into the Bank of Russia's launch of weekly repo auctions from 15 April: in her interpretation, it signals the banking sector's transition to a structural liquidity deficit. Lower banking-market liquidity, slower credit activity and rising bankruptcies are, she argues, only part of the consequences of repeated rate hikes, high inflation and sanctions. On the currency, she considers the current ruble strengthening unstable and dependent on seasonal, economic and geopolitical factors; in the second half of the year, if budget spending increases, the ruble may weaken - a scenario she notes would benefit the budget, exporters, and commercial banks that buy currency at a lower rate.

Taken together, the assessments describe a profession in unusual agreement about direction and in persistent disagreement about depth. The Bank of Russia's own numbers sit close to Expert RA's baseline - inflation of 7-8%, an average key rate of 19-22%, GDP growth of 1-2% - and the April analyst consensus surveyed by the regulator (7% inflation, 20% average key rate) splits the difference. The agency's forecast is, if anything, a shade more dovish than the official picture, and its more favourable variant - 16% key rate, 6% inflation - is one it does not seriously expect to be realised.

Reading the road sign

What, then, does the fork actually mean for the rest of 2025? Three observations follow from the forecast as published. First, the choice between scenarios is largely endogenous: it depends less on sanctions or oil - which Expert RA treats as a persistent drag in both paths - than on the inflation data the Bank of Russia sees between now and September, and on the fiscal discipline of the government. The two-to-three-month lag between any budget overspend and a renewed inflation impulse means the spring spending decisions will effectively pre-write the autumn rate decision.

Second, the composition of growth is changing faster than its headline rate. With investment reduced to 2.1-3% growth propped up by state projects, construction contracting, durable goods weak and raw-material exports squeezed by an overvalued ruble, the economy's remaining momentum is concentrated in consumption, services and budget-financed activity. That mix can sustain positive GDP growth of around 1.5% in 2025, but it is a mix that generates little new productive capacity - which is precisely why Donetsk's warning about 2026 being worse than 2025 deserves attention.

Third, the currency forecast is the clearest statement of the agency's underlying view. An average of 96 rubles per dollar, a fourth quarter above 100, no active intervention by the central bank and first-quarter strength dismissed as technical - this is a projection that expects the external position to deteriorate and the adjustment to happen through the exchange rate rather than through policy defence. For exporters it promises relief; for the disinflation path that Frumina and others worry about, it is an additional headwind; and for households and businesses planning beyond 2025, it is the single most concrete number in the entire forecast.

The fork, in Expert RA's rendering, is not a cliff edge. Neither path runs off it: the baseline delivers managed deceleration with inflation in the high single digits at worst, and even the shock scenario delivers stagnation rather than collapse, with growth close to zero but the budget stable and revenues outpacing inflation. The real divergence lies in 2026 - in whether the credit slowdown that Donetsk expects to last up to one and a half years meets an easing cycle in time, or whether the 'additional shock' path converts a manageable cooldown into a prolonged period of near-zero growth. The signpost, on this reading, is the September meeting of the Bank of Russia: cuts on schedule, and the reasonable-sufficiency road holds; no cuts, and the economy is already taking the other turning. Source: Expert (expert.ru).