MOSCOW – The Russian economy is now showing signs of stabilisation, the central bank’s head of monetary policy said on Tuesday, after taking a hit from unprecedented Western sanctions imposed after Moscow sent tens of thousands of troops into Ukraine.
The economy is set to contract after Moscow began what it calls a “special military operation” in Ukraine on Feb. 24, which triggered sweeping sanctions against Russia, including a partial freeze of its reserves.
However, Kirill Tremasov, who oversees the monetary policy at the central bank, said the crisis in Russia is developing along a more gradual trajectory than initially feared.
“We are clearly on a gentler trajectory. We are already seeing signs of stabilisation,” Tremasov said.
He spoke ahead of a July 22 board meeting where the central bank is expected to trim its key interest rate from 9.5% to support the economy with cheaper lending.
Rate cuts and a more accommodative budget policy are able to support Russia’s economy, Rosbank analysts said, as they revised their forecast for gross domestic product contraction this year to 5% from 8%.
Forecasts among officials and analysts are gradually improving. The economy will contract by no more than 5% in 2022, a presidential adviser said in May.
This was weeks after the economy ministry said GDP was on track to contract by more than 12%, in what would be the biggest drop since the aftermath of the 1991 break-up of the Soviet Union.
Analysts polled by Reuters in late June had on average expected GDP to fall 7.1% this year, compared with expectations for 2.5% growth in a similar poll in January, weeks before the conflict in Ukraine began.
(Reporting by Reuters; Editing by Mark Heinrich)
