© Reuters. Russian President Vladimir Putin attends his annual end-of-year press conference and the Direct Line question and answer session, at Gostiny Dvor Exhibition Centre in Moscow, Russia December 14, 2023. Sputnik/Gavriil Grigorov/Pool via REUTERS
MOSCOW (Reuters) – Annual inflation may approach 8% in Russia this year, President Vladimir Putin said on Thursday, a day before the central bank is widely expected to hike interest rates again to rein in soaring prices.
Most analysts polled by Reuters expect the Bank of Russia to raise its key rate by 100 basis points to 16% on Dec. 15, with inflationary pressure exacerbated by labour shortages and lending growth in addition to soaring government spending and a weak rouble.
Putin has routinely praised the resilience of Russia’s economy against Western sanctions, but tends to skirt around issues such as the weakness of the currency, stubbornly high inflation and the impact of high interest rates on households’ purchasing power, a particularly sensitive topic as the country gears up for a presidential election in March.
“The most important indicator is economic growth,” Putin said in a year-end press conference. “GDP growth by the end of the year is expected at 3.5% – this is a good indicator, it means we have recovered from last year’s fall … and we have made a relatively serious step forward.”
Russia’s gross domestic product (GDP) contracted 2.1% in 2022 as sanctions over Russia’s invasion of Ukraine pounded the economy.
Part of that recovery has been built on Russia’s success in evading a Western oil price cap, although Putin faces numerous economic challenges as he runs for re-election.
“Unfortunately, inflation has increased,” Putin said. “By the end of the year it is expected at 7.5%, maybe a little more at 8%, but the central bank and government are taking necessary measures.”
The central bank targets inflation at 4%. Putin said it was assumed that a return to target indicators would be possible.
One woman’s question via video link about soaring prices for eggs elicited an apology from Putin, though he blamed the government.
“Demand has increased but production has not,” Putin said. “Secondly, we did not open up imports at the required volume in good time.
“I am sorry, so I apologise for this, but this is a failure of the government’s work.”
The government this week said it would exempt 1.2 billion eggs from import duty in the first half of next year to try and rein in prices that have risen more than 40% this year.
