“The Central Bank is unable to control inflation, despite raising the key rate to 21%.”, — write: www.unian.ua
The Central Bank is unable to control inflation, despite raising the key rate to 21%.
The Russian economy is on the brink of recession / photo REUTERSThe fall of the ruble in the Russian Federation has accelerated, and the central bank is unable to control inflation. However, Russia does not face significant constraints in financing the budget or military expenditures. This is stated in the “Russia Chartbook” study by the KSE Institute for December.“The ruble remains under significant devaluation pressure, having lost its previous stability. This autumn, the ruble’s decline accelerated and it depreciated by more than 50% against the US dollar and the euro, and weakened against other major currencies. The main factors behind this are the reduction in hard currency inflows and sanctions against financial institutions and the Moscow Stock Exchange,” the document says.
Analysts noted that the Central Bank of Russia is unable to control inflation, despite raising the key rate to 21%. In November, general inflation was 8.9% in annual terms, and core inflation was 8.2%.
Key factors include near-double-digit wage growth, military spending, a devaluation of the ruble and a 61% increase in private sector lending, or nearly $650 billion, from mid-2022. In December, the Central Bank will likely continue to tighten monetary policy, and markets expect a rate hike of another 200 basis points, according to experts.
At the same time, the external environment remains mostly favorable for Russia, despite the drop in oil prices.
“In November, the price of Russian oil exports fell to $64.4 a barrel, while the discount to Brent remained below $10 a barrel, the lowest since the start of the full-scale invasion. Thanks to a shadow fleet that provides 90% of crude oil exports by sea, Russia received an additional $9.4 billion in revenue in the first 11 months of 2024. These revenues supported the current account surplus at the level of $57.4 billion for January-November,” the study said.
It is noted that Russia does not face significant limitations in financing the budget or military expenditures. In January-November, the deficit of the federal budget decreased to 389 billion rubles compared to 878 billion in the same period last year. A 26% increase in oil and gas revenues and other revenues offset a 24% increase in expenses. To cover the deficit, Russia issued 1.9 trillion rubles of domestic debt from December to date due to limited macroeconomic reserves.
“Ukraine’s allies should use the growing financial pressure in Russia and its limited macroeconomic reserves to increase economic and strategic pressure,” analysts believe.
The economy of the Russian Federation – the latest newsAccording to The Wall Street Journal, for more than two years Russia’s military economy fueled consumer spending and increased corporate profits. Lately, the war has driven up inflation and interest rates, hitting corporate profits.
At the same time, instead of blaming the war on a hostile business environment, the Russian business elite puts their dissatisfaction on the head of the central bank of the Russian Federation.
Specialists of the Visual Capitalist portal created an infographic with the world’s largest economies by gross domestic product (GDP), adjusted for purchasing power parity (PPP). In this ranking, Russia was in the fourth position after China, the USA and India.
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