A Top Russian Banker Warned Putin

The Central Bank's policies are stifling Russia's economy.

A cut in the key interest rate, which will lead to a resumption of investment, will support Russia's economic growth, said Sberbank CEO German Gref, according to The Moscow Times.

According to him, with extremely high real interest rates, which currently stand at around 10%, the economy cannot survive for long.

“It’s absolutely clear that we’ve already overcooled the economy,” Gref said in an interview at the annual shareholders’ meeting.

When asked what needs to be done to restore economic growth, Gref suggested increasing labor productivity and resuming investment.

“What does increasing productivity mean? You know, like in that old joke—how do you increase the productivity of a herd? We used to milk a cow in the morning and evening, but now we’ll milk her five times a day—you can milk this cow five times a day, but she’s hardly going to produce more milk. That’s what our economy is like,” said Gref.

“Because extensive growth has run its course. Our capacity utilization is at its limit. Consequently, we need to adopt new technologies. And, of course, artificial intelligence is at the heart of these technologies. But to implement them, we need investment. And, of course, we need to modernize production and create new production cycles—and that also requires investment.”

Investment in fixed assets (capital investment) in Russia fell by 14.3% year-over-year in the first quarter of 2026.

“For the year, I think we’ll see a decline of 2–3%, depending on the situation—it’s very difficult to predict right now. And this is a leading indicator of economic growth. What needs to be done to resume growth? We need to resume investment. To resume investment, we need to lower the interest rate,” said Gref.

“The problem with the interest rate today is that it used to be a tool for influencing the banking sector to reduce new lending... but the world has changed. Today, floating interest rates prevail everywhere in the world. In Russia, more than 70% of all loans have floating interest rates. The same can be said about the bond market.”

“What happens when the Central Bank raises rates? There is an immediate strain on this very 75% of the entire economy that either holds floating-rate securities or has floating-rate loans. And this is an incredibly powerful lever. If you compare a rate hike 10 years ago with one today—the difference is enormous,” said Gref.

Rising interest rates for businesses drain free cash flow—all the funds at a company’s disposal that could be invested.

“The main source of investment is a company’s own funds. And about 30% comes from loans. But if you have a high real interest rate, you lose access to credit. An investment project simply becomes unprofitable at a 10% real interest rate,” said Gref.

“That’s why it locks the door.” The interest rate is the key to the lock of a company’s investment activity. Without this (a reduction in the rate), there will be no economic growth.”

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