This puts pressure on the Russian economy more than in a number of other countries, primarily due to the relatively low rates of vaccination, which, according to Knight, one way or another slows down business activity and creates risks of new restrictions in the future.
According to the website stopkoronavirus.rf, as of December 17, 76.5 million people, or 52% of the population, were vaccinated with at least one component of the vaccine in Russia. 70.8 million citizens (48%) are fully vaccinated.
While the central bank is making a generally timely effort to repay it, Knight said, it is difficult to talk about controlling price increases. The question of how long the abnormally high inflation will last remains open; moreover, new shocks to the economy cannot be ruled out, Knight said.
The specificity of Russia is that it has a huge territory and it is more difficult to fully assess the scale of the consequences of the rupture of supply chains, he notes. Therefore, the risk of an unexpected surge in inflation next year is considered by the World Bank as quite high.
If it is implemented, the economy will, of course, be under pressure, since the Central Bank will be forced to tighten monetary policy and raise interest rates in response to rising prices, the expert explained.
At a meeting on December 17, the Bank of Russia Board of Directors raised the key rate by 1 percentage point. – from 7.5 to 8.5%, the regulator said in a statement. Thus, it rose to its maximum since October 2017. Current inflation rates did not fit into the October forecast of the Central Bank (7.4–7.9% at the end of the year). According to Rosstat, in November the annual inflation was 8.4%, which was the highest value since January 2016. In the week from December 7 to 13, prices increased by 8.1% in annual terms.
Although the World Bank does not assess the likelihood of new restrictions, as well as weakening of the existing ones, if new sanctions were imposed by large countries or blocs of countries, this would have a negative impact.
About a month before the virtual summit of the presidents of Russia and the United States on December 7, leading American and European media outlets – Bloomberg, Reuters, The New York Times, The Washington Post, CNN, and others – began to overwhelm with alarming messages citing American intelligence about preparations for an invasion of Russia. to Ukraine. The Russian authorities have consistently denied the existence of such plans.
US President Joe Biden, during a video conference with Vladimir Putin, warned his Russian counterpart that if the situation in Ukraine escalated, the US could impose “decisive” economic restrictions on Russia. In turn, Putin called NATO responsible for the situation. According to the Russian leader, it is the alliance that “is making dangerous attempts to conquer Ukrainian territory and is building up its military potential at our borders.”
So far, the energy transition poses a threat to Russia only in the long term, but its pace may accelerate, Knight said. In October, the government agreed on a low-carbon strategy for Russia until 2050. Carbon neutrality is expected to be achieved in 2060.
In part, these four types of risks are reflected in the forecast of the World Bank. According to his estimates, Russia’s GDP will increase by 4.3% in 2021. In 2022 and 2023. the pace will slow down to 2.4% and 1.8%. The most sensitive predictive factor from this list is the spread of coronavirus, Knight summed up.
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