Russian economy entering a phase of cooling, according to Reshetnikov
In an Open Dialogue at the Council of Federation, Maxim Reshetnikov, Russia's Minister of Economic Development, made some striking remarks as reported by RIA Novosti. He pointed out that the economy is currently experiencing a cooling-off phase following the strong growth seen in the last two years.
"We're seeing an increasing number of industries within the real sector of the economy showing a decline in production," Reshetnikov noted. Meanwhile, consumer spending rates appear to be slowing, with household savings on the rise.
"However, the statistics indicate a noticeable slowdown in inflation," Reshetnikov summed up.
As a refresher, according to the Ministry's estimates, inflation in Russia dropped down to 9.78% year-on-year as of May 26, from 9.9% the week prior.
It's worth noting that one of the key factors contributing to this economic slowdown is the high interest rates maintained by the Central Bank. These rates have been kept steady at 21% since October to combat inflation, which has, in turn, impeded investment and economic activity, leading to signs of economic "hypothermia," or overcooling [2][5].
Furthermore, the rate of inflation appears to be declining significantly, with annualized inflation rates hovering around 3-4%, lower than previous levels. While reduced inflation is generally positive, overly low rates may indicate underlying economic issues and the risk of stagnation [3][2].
Additionally, major exporters like Rusal and Gazpromneft have reduced planned exports, indicating a drop in demand amid the slowdown [2]. The tight monetary policy aimed at curbing inflation has also been restraining investment and economic growth [2][3].
The strengthening of the ruble has helped to reduce inflationary pressures by making imports cheaper, but it may also contribute to the economic cool-down [3]. In brief, Reshetnikov emphasizes the delicate balance between fighting inflation and the risk of economic stagnation, suggesting a need to adjust monetary policy accordingly [2][3][5].
The cooling-off phase in the economy, as pointed out by Maxim Reshetnikov, has led to a decline in production in various industries, a matter related to the business sector. Moreover, the slowdown in consumer spending, with savings on the rise, hints at a similar trend in finance, potentially indicating economic stagnation.
