Russia faces economic upheaval, two years to return to inflation target – Nabiullina

Elvira Nabiullina, Governor of the Central Bank of Russia, speaks during an interview in Moscow, Russia June 27, 2019. REUTERS/Evgenia Novozhenina//File Photo

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April 18 (Reuters) – Russia’s economy cannot survive indefinitely on its financial reserves and will need to transform to cope with the impact of international sanctions, Central Bank Governor Elvira Nabiullina said on Monday.

In his most important speech since Russia sent its forces to Ukraine on February 24, Nabiullina said it would take until 2024 to bring inflation back to its 4% target.

“The period in which the economy can live on reserves is over. And already in the second and third quarters, we will enter a period of structural transformation and the search for new business models,” she said.

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The sanctions had mainly affected the financial market, “but now they will start to affect the economy more and more,” she said.

“The main issues will relate to restrictions on imports and foreign trade logistics, and in the future to restrictions on exports.”

She said Russian companies would have to adapt.

“Russian manufacturers will have to look for new partners, logistics or switch to the production of products from previous generations,” she said.

Exporters will have to look for new partners and logistical arrangements and “all of that will take time,” Nabiullina said.

She outlined several measures to help the economy adjust.

The central bank was considering making it more flexible for exporters to sell forex products, she said, and was also testing issuing digital rubles to allow Russians to transfer between digital wallets.

Pilot operations associated with this project were planned for the second half of the year, she said.

Russia’s central bank more than doubled its benchmark rate to 20% when international sanctions hit, but then cut it this month to 17%, signaling a tough economic environment and slowing inflation. Read more

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