Russia’s inflation risks set to rise in 2023, says central bank

RUSSIA’S central bank on Tuesday (Jan 31) said inflation risks were set to rise in 2023, and would come mainly from the labour market, budget and balance of payments.

The Bank of Russia is widely expected to keep its key interest rate on hold at 7.5 per cent at its first meeting of the year next week, with inflation gradually slowing but still well above the bank’s 4 per cent target. Households’ inflationary expectations in January stood at 11.6 per cent.

In a report on economic trends, the bank highlighted the three key inflationary risks Russia faced in trying to haul the economy out of its current slump.

“Inflationary pressures remain subdued. However, pro-inflationary risks from the labour market, budget and balance of payments have increased,” it said.

The bank also warned that the weaker rouble, which dipped in December as a price cap on some Russian oil products came into force, could feed into price inflation. In particular, this could be the case if the country’s trade surplus decreased significantly.

The central bank said the economy had quickly adapted to last year’s shocks, with initially dire predictions of a double-digit contraction in 2022 proved to be unfounded.

SEE ALSO

Russian banks’ profits slumped around 90% in 2022: Central bank

Russian buyers help propel Dubai property sales to record levels

Russian oil revenues falling because of price cap: US official

DECODING ASIA

Navigate Asia in
a new global order

Get the insights delivered to your inbox.

But despite shifting to new supply chains and increasing economic activity in sectors such as agriculture and consumer services towards the end of 2022, Russia continues to face notable threats to its long-term economic health.

“Staff shortages, technological limitations and weak external demand could slow the economy’s transition to sustainable growth from the second half of 2023,” the central bank said. REUTERS