Economists suspect a sudden collapse of the Russian rouble could be imminent as rising import costs and foreign exchange panic take their toll.
The Central Bank has succeeded in keeping the country’s currency relatively stable since the outbreak of war in Ukraine, but recent falls suggest they might be running out of levers to control depreciating factors.
A fall of 8.5 per cent on Wednesday has been dismissed by Kremlin spokesman, Dmitry Peskov, but as the Economist notes, “economic indicators are still taking their toll, and the economy is faltering”.
“The Russian economy is indeed on the brink of collapse and disintegration, despite all the talk about “resiliency.””
The Russian rouble has lost 35 per cent of its value since the start of August and is now trading at around 114.5 against the US dollar – the lowest level since March 2022 in the immediate aftermath of Russia’s full-scale invasion of Ukraine.
Analysts from Russian-based BSC Financial Group said that the fall in the value of the rouble “resembled panic in an environment of uncertainty”.
The latest drop came just days after the US introduced sanctions against Gazprombank, Russia’s third-largest bank, which played a key role in processing payments for the remaining Russian natural gas exports to Europe.
Earlier rounds of sanctions had spared Russian gas because Europe’s economy was so dependent on it, but it is now far less reliant on Russian supplies. The Gazprombank sanctions raise the prospect of a further decrease in gas revenues and foreign currency for Moscow.
The rouble’s weakening threatens to erode Russians’ purchasing power by increasing the cost of imported goods and could further increase inflation.
The country is already contending with runaway inflation, which could climb to 8.5% this year – twice the Central Bank’s target.
The borscht index, an online cost of living tracker monitoring the prices of four ingredients needed to make the traditional soup, reports a 20% rise compared with 2023.
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