Russia hasn’t been a happy place, economically, for some time, what with sanctions over Crimea, the falling price of oil and the cascading value of the ruble. While its own actions are to blame for a number of its woes, others—such as oil prices—are not something it can control, however much Vladimir Putin might want to.
Of course, none of these problems exist in a vacuum, and Russia’s been taking action on various fronts in an effort to cope with sanctions or boost its unfortunate economy. Here’s a look at the top five, and what’s playing out—or might—as a result.
1. Ruble rumble.
The ruble, after losing about half its value in December against the dollar and the euro, came roaring back between February and early April. Experts are divided on whether the upward trend will continue, since the ruble gained more than the price of oil—a factor to which it is usually tied—but sanctions remain in place, as does tension over Crimea.
During the ruble’s plunge, wealthy Russians sought to move money outside the country or spent it on luxury items before retail markets readjusted pricing to account for the currency’s fall. The Russian government stepped in to do what it could to strengthen the currency, and the reversal in direction was so abrupt that some banks are warning Moscow to limit the ruble’s ascent.
With the increase in value, capital outflows have slowed, according to Fitch Ratings, but the situation is still far from rosy. Fitch said in research, “Fiscal buffers are … being eroded as the bulk of financing of this year’s deficit, despite a revival in government debt issuance, will come from the Reserve Fund. The economic outlook remains weak.”
2. Third cut in interest rates this year.
Russia’s central bank has cut interest rates for the third time in 2015, bringing them down by taking action on the temporary rally in the ruble and a slowdown of inflation. It also indicated that it will do more, if necessary, to try to fight the country’s recession.
In December Russia’s interest rate was 17%, but in January the bank surprised markets with a two-point cut. As the ruble went up, interest rates went down; February saw another point reduction, and this latest cut sent rates a further 1.5 points lower to 12.5%.
Now that the ruble is not an immediate crisis, the central bank is turning its attention to the Russian economy—and probable further rate cuts. In a statement, it said, “Amid ruble appreciation and a significant contraction in consumer demand in February–April 2015, monthly consumer price growth is declining and annual inflation is tending to stabilize. As inflation risks abate further, the Bank of Russia will be ready to continue cutting the key rate.”
3. Food import ban likely to be extended.
In retaliation for sanctions, last year Russia imposed a ban on food imports from the U.S., EU and other countries that was originally due to expire on August 7. The country has been investing in its own “food security,” focusing on a goal of self-sufficiency in the production of meat, milk and vegetables.
An EU summit in June is set to consider whether to extend sanctions, and Russia has indicated that its own food import ban is likely to remain in place if sanctions are not lifted. The fall of the ruble had driven up the cost of imported foods, but its subsequent partial recovery and falling import prices has actually supported the ban.