Structural changes in Russian economy actively underway, constrained by stronger ruble, high interest rates - minister

ST. PETERSBURG. June 4 (Interfax) - Structural changes in the Russian economy are actively underway, the question is their direction and the constraints imposed on it by a stronger ruble than many would like and high interest rates, Economic Development Minister Maxim Reshetnikov said at a session on how to return to a trajectory of sustainable growth amid global uncertainty at the St. Petersburg International Economic Forum.

He said there are also issues with the budget deficit, the Central Bank of Russia (CBR) is responding to this, and it will take time to reach budget policy goals.

"Structural changes in the economy are clearly underway and proceeding fairly actively. The question is where we want to direct these structural changes," Reshetnikov said.

"From this point of view it's clear that all our key constraints have not changed by and large. This is the labor market foremost, low unemployment, which is a constraint, including a guide for the CBR in making decisions on the key rate. Issues with investment and the first quarter figures that came out yesterday [showing a 14.3% year-on-year drop] show that this matter is urgent. We are forced to fine-tune the economic model as soon as some significant event occurs, and they happen constantly. This began in 2008, then 2013-2014, then Covid, then sanctions and we're again fine-tuning," Reshetnikov said.

"It is clear that the contours of the next economic model are more or less evident - this is a stronger ruble than many would like, this is still slightly higher interest rates, because there are also issues with the budget deficit. The Bank of Russia is responding to this and we'll need time to reach the budget policy goals that we're setting. We've closed capital outflow, on one hand, this is good, we have resources inside the country, they will accumulate. On the other hand, this again puts pressure on the forex market," Reshetnikov said.

"This is the framework that has formed and in which we have to work, and now it's already to what extent we can fit in this framework and what we do for this. This is where the plan for structural changes in the economy comes in," Reshetnikov said.