Russian economy ‘will not be what it was’, says central bank chief
The head of Russia’s Central Bank warned on Thursday that the country’s economy faces foreign pressures that could persist indefinitely, dampening hopes that conditions could return to what they were before Russia sent aid. troops in Ukraine.
“It seems to me that it’s obvious to everyone that it won’t be like before,” Elvira Nabiullina told a session of the St. Petersburg International Economic Forum, an annual gathering for investors.
“External conditions have long since changed, if not forever,” she said.
Russia has been hit with a wide range of sanctions after the start of the Ukrainian military operation, including cutting major banks from the international payment system SWIFT and banning Western flights. Hundreds of foreign companies have suspended operations in Russia or pulled out altogether.
The consequences of these actions have yet to be fully assessed.
Economic Development Minister Maxim Reshetnikov said in the same session that the prognosis was that Russia’s gross domestic product would fall by 7.8% this year, but “over the past month there has been a wave of improvement in ratings and predictions”.
Many Russian officials have tried to circumvent the sanctions by claiming that Russian companies can step in to take over.
Government funding could help these efforts, but Finance Minister Anton Siluanov has warned that such measures could be overkill.
“Now we’re hearing, ‘Let’s get more funding, let’s invest more there’… such budget medicine shouldn’t turn into narcotics,” he said.
After the ruble lost up to half its value in the first weeks of the Ukraine conflict, Russia took significant steps to support it, resulting in a rebound that propelled it to unprecedented levels For years. However, this made Russian exports more expensive. Many countries, meanwhile, are trying to reduce their dependence on Russian oil and natural gas.
Nabiullina called on Russia to reduce its focus on exports in favor of domestic production.
“We always believed that exports were our intrinsic value,” she said. “We have to rethink and, finally, think about the fact that a significant part of production should work for the internal market, more transformation, more creation of end products.”