BNR – Amid concerns about inflation, Russia is grappling with a weakening rouble, especially after a rise in lending rates.
In August, the central bank raised the lending rate to 12%, marking a substantial 3.5% jump.
The move came following the rouble’s decline against the US dollar.
Rouble Value Drops
Indeed, the rouble showed marginal signs of improvement after the rate hike. However, it still hovers at approximately 95 to the US dollar.
This is a stark contrast from last year’s position when it was trading at around 60 to the dollar.
The central bank’s decision to raise borrowing costs is primarily aimed at combating rising prices.
The price hikes are a consequence of Russia’s increased imports and decreased exports, particularly concerning oil and natural gas.
Additionally, this shift in trade dynamic has led to a smaller trade surplus, resulting in pressure on Russia’s currency.
“Export revenues from oil sales are our most important source of income,” said Ruslan Grinberg, the scientific director of the Institute of Economics of the Russian Academy of Sciences. “These incomes have already decreased by about 40-45 per cent, and it looks like this trend will continue.”
Shortage of Labour in Russia
However, it’s not just economic factors that pose challenges. Russia is also grappling with a shortage of labour.
Even prior to the conflict, Russia faced a dilemma due to its low birth rate, resulting in fewer workers.
Post-invasion, a considerable “brain drain” of talent has occurred, with many skilled individuals relocating to former Soviet states like Georgia.
Additionally, a huge percentage of men have enrolled in forced conscription in the army.
Despite these several obstacles, the Russian government recently analysed its 2023 economic development forecast.
It currently projects a 2.8% rise, with a possibility for a 2.3% GDP growth in 2024.
These predictions, however, are met with scepticism amidst the country’s current economic struggles.