Russia’s central bank chief, Elvira Nabiullina, described the nation’s economy as being in “stormy uncharted waters” amid the impact of Western sanctions and the ongoing war in Ukraine.
The Context
Since the invasion of Ukraine in February 2022, Russia has experienced a massive exodus of talent and capital.
According to the Russian Central Bank, over $253 billion in private capital has left the country, and estimates suggest that up to one million highly skilled workers have emigrated, constituting about 10% of Russia’s technology workforce and a third of its millionaires, according to the Financial Times.
This capital flight severely hampers Russia’s ability to innovate and maintain technological and economic growth.
The sanctions have also led to a significant reduction in foreign direct investment, which dropped from approximately $100 billion annually before the war to nearly zero now, according to Money Week.
What We Know
According to local Russian news reports, during a meeting of the Council of for the Development of the Financial Market under the Federation Council, Nabiullina spoke on the state of the Russian economy. She said, “Our ship has entered very stormy unchartered waters, but the ocean is still an ocean, the helm is in our hands, and we need to firmly pave the way to the goal.”
Naibullina continued that, “Yes, the period of declining inflation, which in calm times takes a year and a half, will now require more time, but we will definitely reach the goal.”
She also spoke about inflation at the meeting, stating that “What does high inflation mean? Like a high temperature in a person, it indicates health problems. In the case of our economy, the picture looks something like this. As we can see, there is no shortage of money even with high rates: loans are growing and record high profits.”
Naibullina also said that the meeting, “Let’s not forget about those people whose already small incomes do not keep up with inflation, for whom our policy of reducing inflation is not an abstraction, but a question of whether they will be able to feed themselves, their families, get out of poverty – on our way there is no avoiding a period of high rates.”
What’s Next?
According to the head of the Central Bank, the regulator expects to conduct the first experimental cross-border payments in cryptocurrency by the end of this year.
This would test a version of a digital ruble, the Russian ruble being the currency of the Russian federation, which has been in use since the 14th century.
If the digital ruble is successfully tested, it could be put into circulation from July 2025, according to local Russian media.
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Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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