Putin admits that Russian inflation is “alarming” and that the economy is “overheating”

Russian President Vladimir Putin said Thursday that inflation is a problem facing Russia and that the country’s economy is overheating.

“There are some problems here, such as inflation, a certain overheating of the economy, and the government and the central bank already have the task of slowing down the pace,” Putin said in his annual “Direct Line” question-and-answer session with citizens Russians on Thursday. , in comments translated by Reuters.

Russia’s consumer price index reached 8.9% year-on-year in November, up from 8.5% in October. The increase was mainly due to rising food prices, with the cost of milk and dairy products soaring this year.

A weaker ruble – following new US sanctions in November – has also boosted inflation, raising the cost of imports to Russia. Meanwhile, a massive increase in military spending has caused labor, supply and production shortages elsewhere, driving up prices and prompting workers to demand higher wages.

“Of course, inflation is an alarming sign,” Putin noted in other comments. reported by Interfax and translated by Google.

“Just yesterday, while I was preparing for today’s event, I spoke with the president of the Central Bank, Elvira (Nabiullina), who told me that it was already around 9.3%. But salaries have grown by 9% in real terms, I think. I want to emphasize this, in real terms minus inflation, and the disposable income of the population has also increased,” he stated.

Russia’s central bank is widely expected to raise its benchmark interest rate by 200 basis points to 23%, the highest level. in a decadeup from 20% seen during the 2022 invasion of Ukraine, on Friday, amid persistently high inflation in the war-focused economy.

Putin blamed international sanctions for the price increases, but also appeared to criticize the central bank, saying experts had suggested other tools could have been used to control inflation, beyond interest rates.

“Of course, external restrictions, sanctions, etc., also have a certain impact. They are not of key importance, but they are still reflected in one way or another (in the increase in prices), because they make the more expensive logistics,” said the Head of State, according to comments reported by the Tass news agency and translated by Google. “But there are also subjective (factors) and our shortcomings.”

“We should have made these timely decisions. In fact, the rise in prices is something unpleasant and bad, but I hope that, in general, maintaining macroeconomic indicators, we can cope with this too,” Putin said.

He added that the Russian government and central bank were tasked with achieving a “soft landing” of the economy, which he insisted was performing well overall and could achieve 3.9-4% growth this year.

The International Monetary Fund predicts that Russia will reach 3.6% growth this year, before a slowdown to 1.3% in 2025.

The “sharp slowdown,” the IMF said, is expected “as private consumption and investment slow amid less rigidity in the labor market and slower wage growth.”

On Thursday, Putin predicted that Russia’s economic growth should be 2-2.5% next year.