A former Russian finance minister has lambasted the government for helping the country enter into a “full-blown economic crisis” for not tackling the nation’s financial problems fast enough during the “quiet years.”
Alexei Kudrin, a former finance minister, warned that Russia will experience the full effects of this year’s tremendous economic collapse as it will be felt in 2015. Kudrin added that the primary reason for the rapid decline of the Russian economy is because of the Ukraine conflict and its respective sanctions and not the fall in oil prices.
Kudrin, who quit the President Vladimir Putin administration a few years ago over his disapproval of enhanced defense spending, believes the ruble will decline even more next year and thinks Russia could very well see its debt downgraded to junk status throughout 2015.
“Russia will get a downgrade,” Kudrin said. ” It will enter the ‘junk’ territory.” Most credit agencies have placed Russia just one notch above junk territory.
He believes the gross domestic product will contract two percent in 2015, with inflation ramping up to 15 percent.
“Today, I can say that we have entered or are entering a real, full-fledged economic crisis. Next year we will feel it clearly,” the former minister, who has been a constant critic of the government, told reporters at a news conference. “The government has not been quick enough to address the situation … I am yet to hear … its clear assessment of the current situation.”
His remarks come as the central bank announced that it will loan Trust Bank approximately $530 million to avoid its downfall or potential bankruptcy. This will be Russia’s first bank bailout since the ruble’s substantial devaluation – it has fallen more than 45 percent since the start of the year.
Economy Minister Alexei Ulyukayev described Russia’s demise as a “perfect storm” of economic sanctions, plummeting oil prices and investors’ capital making an exodus from Moscow. Either the government makes structural reforms amid diminishing oil revenues or it maintains the status quo.
Senior cabinet minister says ruble will revive
Deputy Prime Minister Igor Shuvalov informed news outlets that he expects the ruble to make gains and noted that the government will not intervene in the currency markets as officials do not believe in imposing currency controls to contain the situation.
The deputy prime minister has dismissed rumors that Moscow will introduce capital and currency controls because the ruble has been the worst performing currency in the world today – the Ukrainian hryvnia has also lost half of its value since the beginning of the conflict.
Instead, Shuvalov said Russia is trying to stabilize the ruble rather than returning to pre-crisis levels.
Although Russia may be refraining from introducing currency controls, the government is implementing customs controls starting Monday. The purpose of this measure is to limit the export of cereals in order to lower domestic prices, according to Deputy Prime Minister Arkady Dvokovitch.
Russian farmers have experienced a substantial rise in profits as grain exports are more expensive due to the ruble’s collapse.