Putin’s advisor: The state of the Russian economy 'is like a heart attack'
Russian Presidential Advisor Sergey Glazyev compared the state of the economy to a heart attack. He said this speaking at “The trap of the new normal” forum at the Financial University.
“This was easy to foresee, and we have already talked about this. As soon as monetary authorities opted for the floating exchange rate of the ruble, immediately we got a spike in devaluation, inflationary shock, from which we still cannot recover. And our macroeconomic system is similar to a patient with a myocardial infarction [heart attack]. You can see fluctuations. No country in the world has seen such records ever, for the volatility of the national currency to be so high. It is twice that of the nearest to us, Turkey, with regard to this indicator. Devaluation – we also set records there, including, among oil-producing countries.
“When the Central Bank began raising interest rates, automatically the economic growth began to stall. And in the end, we found ourselves trapped in stagflation, which is characterized by both high inflation, which was caused and continues to be generated by the exchange rate fluctuations and, on the other hand, by rising interest rates, which put the companies in a very unpleasant situation,” Glazyev summed up.
In 2015, Russia’s GDP fell by 3.7% and the inflation rate amounted to 12.9%. According to the forecast by the Ministry of Economic Development, the economy recession slowed down to 0.6% this year and inflation, to 5.8%.
Russia moved finally to a floating exchange rate in November 2014. In mid-December, amid a sharp drop in oil prices and the ruble exchange rate, the Central Bank decided to raise its key rate by 6.5 percentage points to 17%. Currently, the rate is 10%.