The President of Russia – Vladimir Putin has said that the sanctions imposed by West, over Russia’s special operation in Ukraine, have failed to weaken the economy and has only hampered the West.
He said that the West was expecting to upset the financial-economic situation, provoke panic in the markets, collapse the banking system and create shortages in stores. But nothing such happened. Instead, the European Union (E.U.), United States (U.S.) and United Kingdom (U.K.) are struggling to cope with inflation and rising cost of living.
“The strategy of the economic blitz has failed”
In a video call with top officials, Putin said, “The strategy of the economic blitz has failed” and instead led to a “deterioration of the economy in the West.” He stressed that Russia withstood the unprecedented pressure, and that the Rouble has strengthened, and the country has recorded a historic high trade surplus of U.S. $ 58 billion in the first quarter of the year.
Bloomberg Economic Experts have endorsed the claim. They expect the Russia to earn about $320 billion from energy exports this year, up by more than a third from 2021.
Putin acknowledged a sharp hike in consumer prices in Russia, which rose by 17.5% as of April 2022 on a year-to-year basis and directed the Government to index wages and other payments to alleviate the impact of inflation on incomes. The Central Bank of the Russian Federation more than doubled its key interest rate to 20% on February 28, 2022, after the first sanctions were imposed on Russia. It was later reduced to 17% recently.
He noted that Russia must use its budget to support the economy and liquidity in conditions of contracting lending activity even though the central bank’s rate cuts will make lending cheaper. He also said Russia should speed up the process of using national currencies in foreign trade under the new conditions.
The current inflation spike is not because of rising demand but because of low supply. The Central Bank aims to bring it to its 4% target in 2024.
Speaking on the economic situation, the Governor of Central Bank – Elvira Nabiullina said, “The period when the economy can live on reserves is finite. And already in the second and third quarter, we will enter a period of structural transformation and the search for new business models.”
She also said that Moscow will take legal action over the blocking of gold, forex and assets belonging to Russian residents. Of the U.S. $ 640 billion, which Russian had in its golds and reserves, about U.S. $ 300 billion have been frozen because of international sanctions.
She highlighted that the main problems will be associated with restrictions on imports and logistics of foreign trade, and in the future with restrictions on exports. Russian manufacturers will need to search for new partners, logistics, or switch to the production of products of previous generations. She also said the Central Bank is considering making the sale of forex proceeds by exporters more flexible.
In February 2022, Russia ordered exporting companies, including some of the world’s biggest energy producers from Gazprom to Rosneft, to sell 80% of their forex revenues on the market, as the Central Bank’s ability to intervene in currency markets was limited.
