Russia's invasion of Ukraine has had plenty of effects on surrounding nations including itself. In the year and a half that Russia had spent at war, its economy has been dealing with plenty of issues, issues involving inflation, recessionary risks, declining economy, production issues, etc. In another pole to help stabilize the economy the Central Bank of Russia raised the interest rate by two percent landing it at 15% as of now. This was a policy enacted to reduce the rising inflation which as of now is at 7.5% with them vying to lower it to a modest 4% to 4.5%.
Russia is also struggling with its production because of a surge in spending which the bank clarified that "it is increasingly exceeding the capabilities to expand the production of goods and the provision of services." This is mostly the case because Russia is now getting close to spending about 1/3 of its budget on defense spending which is translating to a lack in its production center leading to limited supply. Which translates to higher inflation and higher levels of borrowing.
There are certain fears that the raising of interest rates could slow the country's growth, Mr. Nadorshin, the chief economist at the PF Capital consulting company in Moscow, adds "We are in the moment when growth is transforming into a recession." Though opposite of that there is relief in the people's eyes which they had believed this was all going to be a lot worse so spending and borrowing is continuing steadily. And because of this there has been predicted a low risk of the country falling into a recession and that if this keeps up Russia will return to a growth economy. Another positive for Russia is thanks to Western companies leaving and opening up opportunities for new Russian businesses to fill in the gaps.
Russia seems to be on the path of stability as of now which could change in the coming months, but for now, Russia is moving toward a good spot as of reports.
Cited Source:
https://www.nytimes.com/2023/10/27/world/europe/russias-central-bank-interest-rates-inflation.html
The Central Bank's decision to raise interest rates is a good move to help bring Russia's economy to a more stable level. Western companies leaving the business landscape in Russia could also offer new opportunities for Russian businesses to contribute to a path of recovery.
ReplyDeleteI believe that raising the inflation rate to slowdown inflation is going to beneficial for Russia. However, I do agree that the countries growth will be slowed down. In addition I believe that Russia is underestimating how much the growth is going to be slowed.
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