Sberbank boss Herman Gref is very concerned about the Russian economy: it is showing signs of stagflation, especially in the construction sector. The overall situation is anything but rosy.
The relationship of the Russian people with the state, but also with banks, loans and the ruble, is characterized by great distrust. The savings in apartments that are far too small are often stored in foreign currency – under the mattress or in a piggy bank. However, recently a change in thinking has been observed. There is no point in hoarding money in dollars if the real value continues to fall and you do not get any interest, Gref explained on Friday at the investor day of the largest Russian bank, as reported by the Russian media company RBK. others.
The calculation is simple: “If you put a hundred dollars under your pillow in 2022, you will have at best another $80 left today,” says the manager of Russia’s largest financial institution. “People are now taking the money out of the pillows and mattresses and depositing everything,” the Sberbank boss explains. Another Russian bank, VTB, reported in early December that the share of cash savings had reached an all-time low. VTB attributed this to a rise in interest rates on ruble deposits.
Russia is sliding into stagflation
According to Gref, there are now clear signs of an economic slowdown, especially in housing construction and investments. If the economy stagnates, combined with high inflation, there is a risk of stagflation. The Russian economy is therefore in a serious situation, Gref warns: “A number of industries and borrowers will be in a difficult situation.” “Of course the economy will not last long like this,” the Sberbank boss says alarmed.
Weak ruble is a headache for the Kremlin
Already very high inflation could be further fueled by a weaker ruble, as this would make imports even more expensive. “We have a new factor driving inflation: the exchange rate,” admitted Elwira Nabiullina, head of the central bank. Analysts consulted by the Reuters news agency therefore assume that the central bank will increase its main interest rate from the current 21 to 23 percent on December 20.
To strengthen the ruble, President Vladimir Putin stripped buyers of Russian gas from exchanging foreign currency for rubles at the US-sanctioned Gazprombank. According to over-the-counter bank data, the Russian national currency subsequently gained more than one percent against the dollar. In trading on the Moscow Stock Exchange, the currency also rose one percent against the Chinese yuan to 14.20 rubles.
Again below the limit of 100 rubles
Now the ruble is worth more than a dollar cent again. On Friday there was only 99.50 rubles for one dollar, which again fell below the 100 rubles mark. The price rose by about six percent this week, the strongest increase in more than a year. In November, sometimes more than 110 rubles were charged for one dollar.
Sberbank CEO Herman Gref expects the ruble’s fair value to be between $100 and $105 per dollar. “We currently see no room for a significant weakening of the ruble,” Gref said at the investor day of the largest Russian bank. At the end of next year, Sberbank expects an exchange rate of 112 to 115 rubles per dollar.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
