Sanctions will impact Russian GDP, boost inflation – central bank – RT Business News

Country’s economy will take until 2024 to adjust to new conditions, regulator says

The Russian economy is entering a phase of large-scale restructuring, which will be accompanied by a temporary rise in inflation, the Bank of Russia announced in a statement on Friday.

In its forecast for the next few months, the regulator said businesses and the broader economy needed to adapt to changing external conditions and focus on restructuring production and logistics chains amid imposed sanctions. to the nation. This will be the main factor in the fight against the potential rise in prices, the central bank said.

Operational indicators, including the results of corporate monitoring conducted by the Bank of Russia, show a deterioration of the Russian economy. Companies in many sectors report production and logistics difficulties amid trade and financial restrictions imposed on Russianoted the regulator, adding that economic uncertainty is impacting the mood and expectations of people and commerce.

We expect GDP to decline over the next few quarters. It will be mainly linked to supply problems [but] the support measures put in place by the government and the Bank of Russia will limit the extent of the economic slowdown. The continuation of the recovery trajectory of the Russian economy will largely depend on the degree and speed of its adaptation to new conditions,“said the regulator.

The central bank said it expected the situation to normalize by 2024.

The monetary policy conducted by the Bank of Russia will create conditions for the gradual adaptation of the economy to new conditions and prevent uncontrolled price increases. With this in mind, annual inflation will return to 4% in 2024“, did he declare.

On Thursday, the central bank decided to keep the key rate at 20% per year after its unexpected sharp rise on February 28 from the previous level of 9.5%. The decision to keep the rate unchanged was expected as analysts believe Russia still needs time to assess the impact of recent developments on its economy, and any changes could negatively impact the already volatile situation.

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According to the regulator, recent measures taken to stabilize the situation in the financial markets have so far succeeded in keeping the country’s economy afloat.

Against the backdrop of radically changed external conditions, the sharp rise in the Bank of Russia’s key interest rate on February 28 supported financial stability and prevented an uncontrolled rise in prices,” he concluded.

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