Dec 22, 2014 5:45 AM

Russian minister talks up the ruble

The Associated Press

MOSCOW (AP) A senior Russian minister said on Monday he's expecting the ruble to extend its recent gains and said the government is not planning to introduce currency controls on Russian companies.

The ruble has been the worst performing currency this year along with the Ukrainian hryvnia, having lost half of its value. Its collapse in the past weeks sparked a consumer boom as worried Russians flocked to the shops to buy cars and durable goods before prices rose further.

The government "opposes" currency controls as a way to tackle the ruble crisis, and sees "more harm in them" than potential advantages, Deputy Prime Minister Igor Shuvalov said in comments to Russian news agencies.

The ruble collapse has stirred rumors that Russia could introduce capital and currency controls to keep the rate high.

Shuvalov insisted that the government is seeking to stabilize the ruble rather than see it go back to pre-crisis levels.

Following moderate gains at the end of last week, the ruble was 5 percent higher in early afternoon trading on Monday at 56 against the U.S. dollar.

The Russian currency has been battered by low oil prices, now around $60 a barrel, down from a June high of $107, as well as the sanctions that the West imposed on Russia for its involvement in Ukraine and the annexation of Crimea.

Low oil prices account for as little as a quarter of the ruble decline, according Alexei Kudrin, Russia's finance minister in 2000-2011. Kudrin told reporters on Monday that the sanctions could be contributing up to 40 percent of the collapse.

The Russian government has been revising the forecast for the national economy next year, expecting a recession if the oil prices remain low.

Kudrin warned on Monday that Russia will enter recession next year even if oil prices are as high as $80.

"We are entering or have already entered a full-blown economic crisis, and we're going to feel it to the full next year," Kudrin said. "This is a serious challenge to the economy."

President Vladimir Putin has overseen a full decade of economic growth boosted by high oil prices and the expanding consumer market, but the collapse of the ruble and the rise of inflation could pose a threat to consumer expectations next year.

For the first time since 2000, according to Kudrin, disposable income in Russia is going to drop significantly, by about 4 percent.


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