This pool image distributed by Sputnik agency shows Russian President Vladimir Putin meeting with the Tver region governor at the Kremlin in Moscow on August 9, 2023.
Mikhail Klimentyev | AFP | Getty Images
The U.S. dollar surged above 100 to the ruble on Monday, with the Russian currency nearing a 17-month low as President Vladimir Putin’s economic advisor blamed loose monetary policy for the rapid depreciation.
The ruble has lost around 30% against the greenback since the turn of the year. The Bank of Russia has blamed the country’s shrinking balance of trade, as Russia’s current account surplus fell 85% year-on-year from January to July.
Putin’s economic advisor Maxim Oreshkin told Russia’s state-owned Tass news agency that the depreciation would normalize in the near future.
” A weak ruble complicates the restructuring of the economy and negatively affects the real incomes of the population. In the interests of the Russian economy — a strong ruble,” he said, according to a Google translation.
The central bank on Thursday halted foreign currency purchases for the rest of the year in a bid to shore up the currency, which is fueling fears of rising inflation as Russia attempts to fundamentally transform its economy in the face of increasing isolation and punitive Western sanctions.
The Russian GDP exceeded expectations to grow by 4.9% year-on-year in the second quarter, new figures from the Federal State Statistics Service showed Friday, rebounding from a 1.8% contraction in the first quarter.
But William Jackson, chief emerging markets economist at Capital Economics, noted that limited slack in the economy is likely to further fuel inflation pressures and result in monetary policy tightening, potentially weakening growth over the remainder of the year and into 2024.
“Perhaps the key risk to the economy is if the government keeps fiscal policy loose to support the war effort, which would cause Russia’s economic vulnerabilities to worsen further,” Jackson added.
