An official said Russia could boost the economy by $97 billion without inflationary risks
Russia could boost its economy by 7-8 trillion rubles ($85-97 billion) without raising significant inflationary risks, a senior official said on Wednesday, as Moscow deals with supply constraints and a slowdown in oil production and manufacturing output.
Russia's annual inflation rate rose to a seven-year high of 16.70%, while the ruble and foreign trade fell after Western countries imposed sanctions over the conflict in Ukraine.
Russia raised the key interest rate to reduce volatility, introduced capital controls, banned foreign holders of Russian assets from selling investments, and provided more than a trillion rubles in social payments and corporate support.
"We have certain macroeconomic limits within which we operate," said First Deputy Prime Minister Andrei Belousov. "We more or less understood the limits that allow us to operate without increasing the inflation pressure."
Some Russians rushed to buy basic foodstuffs in the early days after Moscow launched its "special military operation" in Ukraine on February 24.
Belousov said that demand for the most popular goods of social significance had begun to stabilize by late March.
Sugar and the so-called "brush basket," a Russian version of the Big Mac index that contains the most popular daily staples, including potatoes, onions, carrots, and beets, rose 50%-60% after the sanctions, Belousov said. The upper house of Parliament.
He said prices for salt, flour, and cereals increased by 10%-20%, with stocks now enough for five to six weeks, compared to more than two weeks for sugar and 10-12 weeks for baby food and canned food.
Russia's weekly inflation has fallen to 0.66% in the last week, Belousov said, having grown by 2% in the weeks since Moscow sent troops into Ukraine.
Inflation in Russia could reach 17%-20% this year, and the economy could contract by more than 10%, the most profound level since 1994, according to Alexei Kudrin, head of the Russian Audit Chamber and former finance minister.
Belousov said that production volumes fell by about 11 percent in the industrial and trade sectors, with other sectors shrinking by 9-10 percent. Sources told Reuters earlier that Russian oil production reached its lowest level since mid-2020 this week.
The Energy Ministry had earlier suspended the publication of monthly oil and gas production figures. After the central bank stopped disclosing foreign trade data, preventing investors from obtaining the essential data on the Kremlin's financial health.
Prime Minister Mikhail Mishustin said that Russia plans to use all available funds this year for support measures, warning that there will be no budget surplus.
On Wednesday, Belousov said that budget spending had already increased by 20% in the first three months of 2022.
(1 dollar = 82.6000 rubles)
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