27 May 2022 16:59

Russian economy seeing demand crisis, there is risk of deflationary spiral, important to easy monetary policy and weaken ruble - Reshetnikov

MOSCOW. May 27 (Interfax) - The Russian economy is experiencing a demand crisis, and there are fears of a deflationary spiral as the ruble strengthens excessively, so it is important to soften monetary policy and weaken the ruble, Russian Economic Development Minister Maxim Reshetnikov said at a briefing on Friday.

"At the moment, our economy is developing what economists call a crisis of demand - when businesses, consumers, and the population do not spend enough money in the economy," he said.

"Against the backdrop of all this, there are fears that we could go into a deflationary spiral, where we have less money in the economy leading to a reduction in production, lower prices and so on," the minister said.

"Furthermore, an additional manifestation of this was the excessive strengthening of the ruble," he said.

"And it's very good that the Central Bank, in addition to the fact that it reduced the rate [from 14% to 11% on Thursday], gave another strong signal to the economy that it will continue considering further rate reductions. This means that they will revisit this issue, and they will revisit it in early June," Reshetnikov said.

At the same time, he noted that a gradual reorientation of imports was beginning, although the decline in value terms is still significant - by 50%.

"We can see that gradually we're seeing a reorientation of imports. In value terms, it remains at minus 50%, but in physical terms, we have seen some growth in recent weeks. This suggests that chains are beginning to recover," the minister said.