Russian situation may have its impact on global economy

Singapore

DESPITE a drastic 6.5 percentage point interest-rate hike by the Russian central bank on Monday in a bid to prop up the country's falling currency, the rouble has continued to get battered, prompting fears of an economic crisis. It has already lost half its value this year, first caused by Western sanctions and, in recent weeks, by plummeting oil prices.

Oil and gas account for half of Russia's tax revenue and it also needs the price of oil to be around US$100 per barrel to balance its budget. Of course, the price of crude is nearly half of that. Fortunately for Russia, the low price of the rouble was cushioning it from falling oil prices. But the currency could not withstand the pace and extent at which the rouble has fallen, adding more pressure on it and prompting the central bank to suddenly raise rates from 10.5 per cent to 17 per cent.