18 Sep 2023 17:53

Weakening ruble is main factor in accelerating inflation; must react 'without delay' - Putin

MOSCOW. Sept 18 (Interfax) - The situation on the forex market has played a key role in increasing pro-inflationary pressure in recent weeks, Russian President Vladimir Putin said in a statement.

"Of course, it is obvious that one of the main problems is now related to accelerating inflation. The main factor here is clear, which is the weakening ruble; and it is necessary to understand its reasons clearly and to take the corresponding decisions in a timely manner without delay," Putin said at a meeting on the draft federal budget for the coming three years.

"I am confident that the government and the Central Bank will work professionally and, what is important, in a coordinated manner," Putin said.

Reacting to the sharp rise in pro-inflationary risks, the Central Bank of Russia (CBR) hiked the key rate by 350 basis points from 8.5% per annum to 12% per annum during an unscheduled meeting in August. The CBR hiked the rate an additional 100 bps last Friday, and announced the possibility of renewed tightening of monetary policy going forward.

The Economic Development Ministry earlier in September raised its inflation forecast substantially to 7.5% for 2023 from its outlook of 5.3% in the April version, and to 4.5% for 2024 from 4%. The CBR on September 15 increased its inflation forecast to 6%-7% for 2023 from 5%-6.5%, and the regulator still expects it to return to around 4% next year. According to CBR estimates, annual inflation had grown to 5.5% as at September 11 after 4.3% in July and 5.2% in August.

At the opening of the meeting, Putin did not provide figures for the draft budget that should be submitted to the State Duma shortly.

"I know how much work the government has already done, simply colossal in its volume and complexity. The draft budget has been prepared, and in general, in my opinion, it has turned out balanced. I am aware of all the disputes within the government on these issues, but there is not much time left before the package of corresponding bills is submitted to the State Duma, and the final point must be placed. It is necessary to use it, the budget, 'to tighten up' and adjust some details effectively," Putin said.

According to Putin, the current economic situation "is generally stable and balanced. My colleagues and I discuss this often, nearly every day, with both the prime minister and with the economic bloc. We will also meet and talk today with Mikhail Vladimirovich [Mishustin] separately. I would like to say immediately that the situation is significantly better than previous estimates and forecasts for a number of key indicators," Putin said.

"The situation overall is stabilizing in terms of executing the current federal budget. It was once again executed at a surplus in August. Yes, in general, there has been a slight deficit since the start of the year [cumulatively since the beginning of 2023], though at a surplus in August already, and not for the first time. It is important that non-oil and gas revenues are significantly higher than last year's figures. In turn, oil and gas budget revenues recovered in July-August to approximately last year's level, and active growth continues when accounting for the situation on global markets," Putin said.