The government of Russian President Vladimir Putin and its central bank, headed by Governor Elvira Nabiullina, have at times expressed opposing views on the country’s economy.
Getty Images, Reuters
The Russian government is not loving its central bank’s gloomy economic updates.
It’s pushing the bank to give more positive outlooks for the country’s economy, per Bloomberg.
The central bank has been candid about Russia’s economic pressure amid the war in Ukraine. This may be at odds with the official stance.
The Russian government is not loving its central bank’s gloomy economic assessments. Instead, it is reportedly asking for more jolly outlooks.
The Russian economy has been under stress ever since the country invaded Ukraine in February 2022, triggering widespread sanctions from the West and its allies, which hit the energy giant’s oil and gas revenue.
Through it all, the Russian central bank has been candid about its assessment of the country’s economy, which at times stood at odds with more bullish statements from the Kremlin.
But that may soon change — Russian officials are putting pressure on the country’s central bank to give more “upbeat” assessments about the country’s economy, Bloomberg reported on Tuesday, citing people familiar with internal deliberations.
In December, analysts at the Bank of Russia — headed by governor Elvira Nabiullina — said they anticipated “new economic shocks,” due to a $60 per barrel price cap on Russian oil and the European Union’s ban on the country’s crude. In October, research from the Bank of Russia showed the country’s economic activity stalled in September — in part, due to President Vladimir Putin’s partial mobilization order that sent many fleeing the draft.
Senior government officials have criticized the central bank for mishandling market expectations and for giving forecasts that were too pessimistic and alarmist, Bloomberg reported.
The Bank of Russia, though, is open to improving these forecasts so as to send a signal that it’s on the path to monetary easing in the months ahead, per Bloomberg.
The Russian economy likely contracted by 2.5% in 2022 from a year ago, but was still beating expectations, President Vladimir Putin said in televised remarks on January 17, per Reuters.
It’s not just propaganda. Key to the central bank’s messaging is interest rates. Russia’s key interest rate is 7.5% now, but the government wants the central bank to express more optimism about the economy in a signal that it could start cutting rates, per Bloomberg. But the Bank of Russia is concerned about higher inflation should rates fall.
Russia covers its budget deficit by borrowing domestically, so interest rates are important for the government. A slump in energy revenues, coupled with an increase in defense spending has pushed Russia’s budget deficit to 1.76 trillion rubles in January, or $24.75 billion.
The deficit — which is only for the first month of 2023 — is already at 60% of Russia’s plan for a $2.93 trillion-ruble deficit, Insider previously reported.
The Bank of Russia did not respond to Insider’s request for comment sent outside regular business hours. It’s also in a communication blackout ahead of its first board meeting of 2023 on Friday, per Bloomberg.