Russia suffers from an acute shortage of manpower due to the call to war and the emigration of young people of working age to ensure a life away from conflict.
Is released Central Bank of Russia His strongest warning yet that the Kremlin summons men to fight in Ukraine leaves the economy without workers and could put pressure on inflation, which has prompted him to keep interest rates unchanged for the second meeting consecutive, according to Bloomberg, which was seen by Al Arabiya.net.”.
Policy makers kept their benchmark interest rate at 7.5%, in line with the expectations of economists polled by Bloomberg. The ruble maintained its losses after the announcement and fell 0.4% against the dollar.
This comes after the mobilization of 300,000 men and the resulting mass exodus of Russians created a labor shortage at a time when unemployment was already close to an all-time low and the population was declining.
The central bank said on Friday that “the ability to expand output in the Russian economy is largely constrained by tight labor market conditions.”
Speaking after the decision in Moscow, central bank governor Elvira Nabiullina said the central bank was sending a “neutral signal” about what it intended to do next and that its future decisions would be “data-driven”.
“Due to the growing shortage of employees, labor costs are rising in companies,” Nabiullina said. This is evident among companies operating in industry, transport, logistics and construction. If wages grow at a rate higher than labor productivity, this can lead to further price increases through labor costs.
Unemployment in Russia
The decision goes beyond a year that included a sharp monetary easing cycle that reversed the surge following the Kremlin’s invasion of Ukraine. Encouraged by a sharp slowdown in consumer prices, the central bank was in a hurry to reverse the unprecedented measures imposed after the invasion in late February, as the economy slid into crisis under the weight of sanctions imposed by the United States and its allies .
Before October, policy makers agreed to cut interest rates by 12.5 percentage points to facilitate in six meetings to bring rates below the pre-war level.
Since peaking near 18% a year in April, inflation has slowed to around 12%, or close to the lower bound of the central bank’s year-end forecast. Price expectations, a key driver for policy makers, also fell in November for the first time in 4 months.
While inflation could fall even below the central bank’s 4% target next spring, Nabiullina said the focus would be on the one-off adjusted numbers. Policymakers on Friday maintained their forecast for price growth in 2023 at 5%-7%.
On the other hand, the finance ministry – which had projected a full-year budget deficit of 0.9% of GDP – revised its deficit forecast to 2% as revenue fell and spending on the war effort increased.
Combined with high government spending, the recall, announced nearly 3 months ago, poses inflationary risks through labor market stress. As a result of the mobilization and the wave of immigration that followed, the male labor pool could decrease by 2%.
