SHAFAQNA – Russia’s prime minister has admitted the country is at risk of entering a period of “deep recession,” according to a news agency.
Dmitry Medvedev’s comments – quoted by RIA Novosti – were made as the country stepped up its efforts to shore up the rouble – battered in value through a toxic combination of weak oil prices alongside Western sanctions over Russia’s actions in Ukraine.
The latest move to boost the currency was announced on earlier on Tuesday by the central bank, which pressured state-owned firms to sell foreign currency reserves.
The companies were reported by a newspaper, Kommersant, to include the oil majors Gazprom and Rosneft.
Just 24-hours earlier, the bank set a limit for its overnight foreign exchange swap operations at $10bn to help alleviate the shortage of roubles.
The currency – which tumbled to almost 80 to the dollar at the height of its collapse – was trading at two-week highs of 52 against the dollar on Tuesday but remained susceptible to shocks.
Economists say the crisis risks a repeat of soaring inflation and mass protests – last seen in the country’s financial woes of 1998 which wiped out people’s savings.
The Russian economy’s dependence on oil – and its failure to diversify – means it is particularly vulnerable to slides in world oil prices.
The collapse in oil costs – by up to 50% – sees Brent crude currently at $60.8-per-barrel.
There is no sign of an imminent increase as the Saudi oil minister, who has the most clout among the members of the powerful OPEC cartel, has said there will be no production cuts to boost prices even if Brent falls as low as $20.
The sanctions make it almost impossible for Russian firms to borrow from the West.
Consumers have been snapping up ‘big ticket’ items ahead of steep price increases while foreign companies, including Jaguar Land Rover and Apple, have suspended sales in Russia.
Mr Medvedev told a political gathering the Russian economy was in a worse place now than in the 2008 financial crisis because “a number of countries are effectively hampering the development of our economy.”
He insisted the Government could not retreat from its strategic aims and social spending for risk of plunging Russia into a “deep recession.”
Russia is tipped to officially enter recession – defined as two consecutive quarters of negative growth – in the spring.
Mr Medvedev’s comments follow those of another key ally of President Vladimir Putin, former finance minister Alexei Kudrin, who urged the Kremlin on Monday to begin negotiations with the West on sanctions to avoid a “full-blown economic crisis.”