The World Bank has revealed four types of risks that threaten the Russian economy. David Knight, Chief Economist of the World Bank for Russia, told about this. edition “Vedomosti”.
According to him, the threat of a pandemic is putting pressure on the Russian economy more than in a number of other countries. The expert noted that, first of all, this is due to the low rates of vaccination. He also added that one way or another, business activity is slowing down and there are risks of introducing new restrictions in the country in the future.
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In early December, the World Bank released a report stating that the rate of vaccination in Russia would not change in 2022 and a significant portion of the population would remain unvaccinated for most of the year. Therefore, COVID-19 will continue to pose a great threat to the health of Russians, and the authorities may impose constant and periodic restrictive measures. The organization called the control of morbidity by the state a factor that directly limits the economic activity of residents.
Unexpected surge
Knight also said that in Russia in 2022 there is a fairly high risk of an unexpected surge in inflation. According to him, this is due to the fact that Russia has a huge territory, and therefore it is more difficult to fully assess the scale of the consequences of the rupture of supply chains. The economist stressed that, in general, the Central Bank is making timely efforts to offset inflation. However, if prices rise, the Central Bank will have to tighten monetary policy and raise the key rate.
The World Bank spokesman also warned that it is difficult to talk about controlling price increases. According to him, the question of how long the abnormally high inflation will last remains open.
On December 17, the Board of Directors of the Bank of Russia decided to raise the key rate by 1 percentage point to 8.5 percent. This is the seventh consecutive increase since March in the main parameter of monetary policy. The reason for this was the strengthening of inflation and inflationary expectations.
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In November, according to Rosstat, the rise in prices in Russia reached 8.4 percent in annual terms. This is the highest since February 2016. Following the results of the last meeting, the Central Bank raised the inflation forecast to 7.4-7.9 percent per year, however, the regulator does not exclude that it will not be possible to achieve it either. As of December 13, annual inflation rose to 8.1 percent.
Tense situation
The World Bank notes that the Russian economy may be threatened by the introduction of new international sanctions. It is emphasized that if large countries or blocs of countries introduce restrictive measures, this will have a negative impact.
Recently, there have been reports in the media about the possibility of new sanctions against Russia from Western countries due to the escalation of the situation on the border with Ukraine. Thus, US President Joe Biden, during his talks with Russian leader Vladimir Putin, threatened to introduce restrictive measures in the event of a conflict.
Knight also named the energy transition among the most dangerous risks for Russia. According to him, this process poses a threat to Moscow in the long term, but its pace may accelerate. Earlier in October, the Russian government agreed on a low-carbon strategy for Russia until 2050. It is planned to achieve carbon neutrality in 2060.
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