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Watching for Russian Financial Instability
DerekJohnson
Administrator, Swaye's Wigwam Posts: 60,233
in Tug Tavern
By Geopolitical Futures -June 30, 2021Open as PDF
Background: Even before the pandemic, Russia’s economy was struggling under the weight of sanctions and the low price of oil, which remains Russia’s main export. Though Russia’s gross domestic product contracted less than expected last year and 2021 forecasts are fairly positive, the country’s financial sector is not signaling much optimism.
What Happened: Russian President Vladimir Putin said annual inflation was at 5.9 percent – above the target rate of 4 percent – and noted persistent problems with food prices. Elvira Nabiullina, the chairwoman of the Russian central bank, signaled a rate hike, saying the economy had reached pre-crisis levels and low interest rates would only fuel speculation and bubbles. Mortgage lending growth could exceed 20 percent this year, the central bank chief said.
Bottom Line: The situation could be worse, but the financial sector is worth watching because of the sizable risk of miscalculation and the resultant consequences. For the Kremlin, any instability could signal to its enemies that it is vulnerable and/or that sanctions are working.
Background: Even before the pandemic, Russia’s economy was struggling under the weight of sanctions and the low price of oil, which remains Russia’s main export. Though Russia’s gross domestic product contracted less than expected last year and 2021 forecasts are fairly positive, the country’s financial sector is not signaling much optimism.
What Happened: Russian President Vladimir Putin said annual inflation was at 5.9 percent – above the target rate of 4 percent – and noted persistent problems with food prices. Elvira Nabiullina, the chairwoman of the Russian central bank, signaled a rate hike, saying the economy had reached pre-crisis levels and low interest rates would only fuel speculation and bubbles. Mortgage lending growth could exceed 20 percent this year, the central bank chief said.
Bottom Line: The situation could be worse, but the financial sector is worth watching because of the sizable risk of miscalculation and the resultant consequences. For the Kremlin, any instability could signal to its enemies that it is vulnerable and/or that sanctions are working.