Top Russian bank official says country still to face real impact of sanctions
Elvira Nabiullina said the effects will 'increasingly' impact the economy
Russia’s top banking official admitted this week that sanctions have pushed the economy to the brink as the country tries to maintain some semblance of stability.
Bank of Russia chief Elvira Nabiullina presented the bank’s annual report for 2021, detailing the country’s economic recovery from the impact of the pandemic. She went on to describe the devastating effect western sanctions have had on the country following its invasion of Ukraine.
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"In the first place, the sanctions imposed against Russia affected the situation in the financial sector, spurred the demand for foreign currencies and caused fire sales of financial assets, a cash outflow from banks and surging demand for goods," Nabiullina said in prepared comments. "Furthermore, risks to financial stability increased."
Elvira Nabiullina, Governor of Russia's Central Bank, speaks during an interview in Moscow, Russia, June 27, 2019. | Reuters
The ruble recovered its lost value since the start of the invasion, with $1 equal to around 77.38 RUB as of Saturday. The exchange rate prior to the invasion saw $1 equal to roughly 83.53 RUB, with the peak at around 139 RUB.
Nabiullina credited the recovery to several measures the bank took to mitigate risk, including a higher key rate, capital controls, the suspension of trading for almost a month, support for banks’ borrowers and subsidized lending programs for small businesses.
She argued that businesses will need to continue adapting in order to combat the sanctions, including finding "new partners" and "new logistics routes" to deliver products.
"Currently, this problem might be not as acute because the economy still has inventories, but we can see that the sanctions are being tightened almost every day, including the restrictions on Russian goods transportation and the operation of Russian carriers," Nabiullina acknowledged. "However, the period when the economy can get along with stocks is limited.
"The sanctions have affected the financial market, but now they will start to impact the real economy, increasingly more significantly," she added.
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Economic experts previously told FOX Business Russia’s recovery was temporary and that it would increasingly suffer as the West continues to ratchet up sanctions.
"This is an ongoing process," Anthony Kim, a research fellow in economic freedom at the Heritage Foundation, told FOX Business. "For now, as markets are processing more and more information, and we see the conflict is getting prolonged rather than getting really intense and more negative. But this is not the end outcome.
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"There was an immediate shock or reaction from the Russian market and the markets outside Russia, which is why we saw this immediate legitimate panic and legitimate downturn," Kim explained. "And where we are now is a different kind of period."