Putin admits Russian inflation is ‘alarming’ and economy ‘overheating’

Russian President Vladimir Putin on Thursday said that inflation is a problem facing Russia, and that the country’s economy is overheating.

“There are some problems here, namely inflation, a certain overheating of the economy, and the government and the central bank are already in charge of lowering the rate,” Putin said in his annual Q&A session “Direct Line ” with Russian citizens on Thursday. , in comments translated by Reuters.

The consumer price index in Russia reached 8.9% in November year-on-year, from 8.5% in October. The increase was mainly driven by rising food prices, with the cost of milk and dairy products rising this year.

A weaker ruble – after the new US sanctions in November – also fueled inflation, increasing the cost of imports to Russia. Meanwhile, a massive increase in military spending caused labor, supply, and production shortages elsewhere that pushed up prices, and prompted workers to demand higher wages.

“Of course, inflation is such an alarming signal,” Putin noted in further comments reported by Interfax and translated by Google.

“Yesterday, when I was preparing for today’s event, I spoke with the President of the Central Bank, Elvira. [Nabiullina] which told me it was already somewhere around 9.3%. But wages have grown by 9% in real terms, I want to emphasize this – in real terms minus inflation – and the disposable income of the population has also grown,” he said.

Russia’s central bank is widely expected to raise its benchmark interest rate by 200 basis points to 23% – the highest level yet. in a decadefrom the 20% seen during the invasion of Ukraine in 2022 – Friday, amid stubbornly high inflation in the war-centered economy.

Putin blamed international sanctions for the rise in prices, but also appeared to criticize the central bank, saying experts had suggested other tools could be used to tame inflation, besides interest rates.

“Of course, external restrictions, sanctions, and so on also have an impact to some extent. They are not of primary importance, but they are always reflected in one way or another. [in the rise in prices]because they make logistics more expensive,” said the head of state. according to comments reported by the Tass news agency and translated by Google. “But there are also subjective ones [factors]and there are our faults.”

“We should have made these timely decisions. This is an unpleasant and bad thing, in fact, the increase in prices, but I hope that, in general, maintaining the macroeconomic indicators, we will face this too,” said Putin.

He added that the government and the Russian central bank were tasked with providing a “soft landing” of the economy, which he insisted was a good performance overall and could achieve growth of 3.9-4% this year.

The International Monetary Fund predicts that Russia will grow by 3.6% this year, before slowing to 1.3% growth in 2025.

The “sharp slowdown”, the IMF said, is expected “as private consumption and investment slows amid a tight reduction in the labor market and slower wage growth”.

On Thursday, Putin predicted that Russia’s economic growth should be 2-2.5% next year.