The Governor of the Central Bank of Russia, Elvira Nabiullina, tried to resign after President Vladimir Putin’s decision to order the invasion of Ukraine, but her request was denied. Bloomberg reports, citing four people familiar with the discussions. Nabiullina herself was nominated by Putin last week for a new fiveyear term in which she must deal with the aftermath of a war that wiped out the results of her nineyear presidency of the Central Bank of Russia in just days.
According to initial estimates, the invasion of Ukraine and Western sanctions will burn away 15 years of economic growth with a doubledigit drop in GDP. On the other hand, the partial reopening of the Moscow Stock Exchange saw government bonds rise by over 200 basis points, with 10year OFZs reaching over 14%.
Nabiullina, 58, did not publicly comment on the news of her reconfirmation and did not respond to a question about the agency’s article. According to Bloomberg sources, the climate inside Russia’s central bank after the sanctions announcement was one of desperation and fear of being trapped in an institution largely isolated from the market economy.
Furthermore, although central bank officials had considered a possible suspension of the Swift service, the freeze on central bank reserves seemed entirely unlikely. In a brief statement last Friday, after Nabiullina decided to keep interest rates near a twodecade high of 20%, he postponed reaching the 4% inflation target to 2024 and warned that the economy was on track to a contraction phase. Also, contrary to what has happened over time, he did not answer questions after the board meeting.
Goldman Sachs further lowered its forecast for Russia’s GDP to 10% from 7% after recent trade sanctions suggested a 20% drop in exports in the second quarter and 10% in the second half. Barclays expects 12.4% this year and warns that “due to current geopolitical conditions, we believe sanctions will be longlasting”. It’s not default that both Moscow and Washington are taking their time on: But with inflation heading towards 25%, the economy faces a vertical collapse.