The effect of Western sanctions In the Russia it finds its way into the pockets of ordinary people and queues to buy it sugar which is up 20% since the beginning of the year, and to stock up on a range of goods imported or manufactured by foreign multinationals from diapers to the toothpaste which will soon become scarce or could become even more expensive. The impact on banks and currency market, but after the initial shock it seems to have stabilized. And on March 21st the Moscow Stock Exchangestayed closed From the day after the invasion of Ukraine began, it opened its doors to the Government bonds of the Russian Federationwhere the feared last week did not come true Originally. The rebound in trade appears to be supported by the central bank’s strong hand buying bonds to ‘prevent a surplus volatilityThe 10year yield has consequently fallen sharply to 13% after peaking at 19.8% on March 4th.
“L‘Effectiveness Sanctions increase significantly when the strength of the pressure applied varies depending on the country’s behavior,” the former deputy governor of the Central Bank of Russia commented in his newsletter Sergei Alexashenko. “It is evident that in recent days, despite Putin’s transition to increasingly violent attacks against Ukrainian cities and civilians who print Western sanctions have not increased. Morality: without measures that also affect theenergy export it is no coincidence that we are again talking about a possible oil embargo in Brussels it seems difficult to achieve something in the short term in this way. Even if the shares of Russian companies are on Western lists deleted their own value and the economists in the medium to long term Branko Milanovicamong other things, a new “criminalization of society” to circumvent restrictions on the import of consumer goods, great difficulties in replacing Western technology (software, cars, airplanes, household appliances) and a sharp increase in skilled labor migration.
For the time being, the situation has not deteriorated despite the foreign exchange reserve freeze. there rush to the counters Partially occurred, but the intervention of the expected in early March central bank which provided liquidity to the institutions within ten days 8.8 trillion rubles has defused the crash risk so far. Twothirds of these loans, Aleksashenko notes, were used to cover custodian withdrawals, but then high interest rates on deposits (up to 20.5%) and the impossibility of buying foreign currency reversed the flow and Two thirds of the cash went back to the accounts electricity or deposit. Immediately afterwards, interest payments on dollardenominated government bonds ran smoothly, despite the Treasury Secretary Anton Siluanov had repeatedly mentioned the possibility of payment in rubles. According to Aleksashenko, it’s likely that “some Russian investor” knew full well that it was a bluff and did speculated Buy shares when their value has fallen and resell them to avoid default.
But what are the prospects for the real Russian economy now? The central bank governor on Friday Elvira NabiullinaShe has just been confirmed for the third term, although rumor has it she has tried several times to give it resignation, acknowledging that inflation “will remain high for some time, but we will not allow the inflationary spiral to spread,” he added. The jump between late February and early March, he explained, was “caused by a boom in demand especially of nonfood goods such Household appliances, cars, electronic devices and furniture“Due to fears that availability will be reduced due to sanctions, some companies exiting Russia and a weaker ruble’ But ‘in the second week of March this feverish demand abated’. Not so for groceries, but goods like”Grain, flour, pasta and sugar are produced mainly in Russia from domestic raw materials, the stocks of these products are sufficient and their production continues . All companies “experiment production interruptionsof the logistics chain and Settlement with Foreign Counterparties. But, the central bank assured, now the economy will adapt to the new context: “It used to be unprofitable to produce some goods in the country, now it becomes more interesting”. In the next quarter, he conceded: “GDP will fall”. External observers are estimating a slump that could reach 10% this year.