UPDATE: Cbanker: Russian budget policy begins to support economic growth

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MOSCOW, Nov 20 (PRIME) -- Russia’s budget policy now supports economic growth, Central Bank Chairwoman Elvira Nabiullina told the State Duma, parliament’s lower house, on Wednesday.

“A delay in budget spending suppressed growth in January–June and led to a rapid slowdown of inflation. According to our assessment, budget policy is now transforming from the one holding back growth to a supporting one,” she said.

Economic growth will be lower than expected in 2019, but now the economy is speeding up. It advanced 1.7% on the year in July–September with the growth additionally supported by a good harvest, a rise in agricultural output, and wholesale trade, she added.

“The central bank… ensures the financial and price stability to provide conditions for economic advance. It creates conditions for business operations now and tomorrow. The companies design business plans not for a quarter or a year, but for several years ahead, and low inflation is one of the key conditions for business planning.”

Nabiullina also said that the central bank aims at reduction of dependence from foreign currencies, and that the share of Russia’s corporate loans in foreign currencies has already dropped to 24.5%.

“We all saw how large liabilities in foreign currencies may turn into a problem if the external conditions change. We have pursued the policy of reducing dependence on foreign currencies through regulatory tools over the past few years. Corporate loans in non-ruble currencies have slid from almost 40% in 2015 to 24.5% now,” she said.

Russia has protected itself against unfavorable economic and geopolitical factors thanks to a reduction of the share of U.S. dollar in the country’s reserves since early 2018.

“The foreign currency and gold reserves increased by an additional U.S. $72 billion this year. At the same time, we have changed the reserves’ structure radically since the beginning of 2018 by reducing the U.S. dollar share. It gives us stronger protection, more confidence under any economic and geopolitical conditions,” Nabiullina said.

As of November 8, Russia’s foreign currency/gold reserves amounted to U.S. $541.1 billion.

The chairwoman said that the share of foreign trade with settlement in national currencies increases.

The central bank is running a neutral monetary policy, aimed at maintaining inflation at 4% annually, but still sees potential for its further softening, Nabiullina also said and added that mortgage rates will decrease following future key rate cuts to 7–8% in the next few years.

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