Page 39 - BNE_magazine_bne_September 2019

bne September 2019 Cover story I 39
Consumer price inflation
The crucial, yet somewhat underappreciated achievement of Russia's Central Bank has been finally lowering inflation, under Putin's blessing, to mid-single digits after hyperinflation of the early '90s and double-digit price growth until 2015. Inflation is one of the indicators that most worries regular Russians. In the 90s inflation was over 1000% and remained in double digits until 2007 when it dropped below 10% for the first time in modern history. By 2018 inflation fell to a post-Soviet all time low of 2.3%, on a par with "normal" countries, but the population's expectation for high inflation remains and the rate remains unstable. The CBR are forecasting that inflation will fall below its target rate of 4% again next year.
Russia consumer price inflation %
Economic reform plans
Under Putin there have been several attempts at reform, most of which have failed.
The first was the Gref plan launched shortly after he took office that was ended by the 2008 crisis.
The next was the Concept for the Long-Term Socio- Economic Development of the Russian Federation until 2020, but thanks to the global crisis it was never implemented.
In January 2011, Putin instructed the Higher School of Economics and the Presidential Academy of National Economy and Public Administration to create a new Strategy 2020, which resulted in the so-called first round of the May Decrees in 2012, signed on May 7 that year.
The result of the first round of May Decrees did little to reverse the slide into stagnation, so they were replaced with a new round of May Decrees in 2018 that have been augmented with the 12 national projects that are the latest version of the plan to transform Russia’s economy.
Reserves, external debt and import cover
The flood of petrodollars that arrived in the noughties has transformed Russia’s finances. When the 1998
crisis happened Russia had a mere $10bn of interna- tional reserves, which was enough to pay for two and half months of imports – less than what economists believe
is needed to ensure the stability of the national currency.
But as the noughties wore on the government prudently squirreled away the excesses into various rainy-day funds. Even after the stagnation set in from 2013 the state has prudently maintained these very high levels of reserves
in anticipation of more shocks, and more recently in anticipation of more sanctions.
Reserves peaked in 2013, about a year before Crimea's annexation and the onset of the conflict over Ukraine. In the following years they declined because of the
Russia gross international reserves vs debt, reserves equivalent of import cover
www.bne.eu