Russia is an inflation warning. Recovery at risk?

Russia is an inflation warning. Recovery at risk?
Russia is an inflation warning. Recovery at risk?

The economic recovery in Russia is at risk. All the fault of that inflation exacerbated by the anti-Covid stimuli of Putin and the leaders of the Kremlin, but also by the scissoring of the interest rate by the Central Bank – which fell to a minimum of 4.25%, then increased to 5% – and by the great race in prices of food on a global scale.

After slowing down in April, +5,5%, annual inflation rose in May to +5,9%, in a trend that second Elvira Nabiullina, number one of the central bank, could turn into “an obstacle to economic recovery”.

Russia is an inflation warning. Recovery at risk?

The rest, Nabiullina, who spoke at the St. Petersburg International Economic Forum (SPIEF) this morning, does not believe the inflationary pressure in Russia is “temporary“, And therefore mostly attributable to the restart of the economy, but rather it is linked”to other persistent factors, mostly monetary”.

A thesis also corroborated by the Minister of Finance, Anton Siluanov, who speaking to the SPIEF audience stated: “If we keep increasing spending, what do we get? An overheating of the economy. The effects are already visible, such as rising inflation”.

Russian inflation is currently well above target fixed by the Central Bank itself, al 4%, and will most likely end up on the table at the next meeting of the Federation’s central bankers scheduled for June 11.

Analysts expect a interest rate increase of at least 25 basis points, from 5% current al 5,25%, with Nabiullina who, however, has already mentioned the “risk of seeing very high inflation for several months”.

Unequal growth in Russia

Another bad thing, for the Central Bank, is that relating to growth imbalances, although there is: according to the latest bulletin, in fact, the economy rebounded again in the second quarter of the year and GDP – inflation permitting – could reach pre-pandemic levels already during the summer.

However, as pointed out by the Central Bank analysts themselves, “growth is unfair. Industries with a focus on exports and the service sector have been recovering for months at a rate well above the national average”.

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