President Vladimir Putin has unveiled double-digit increases to Russia’s minimum wage and pensions as soaring inflation and western sanctions push up the cost of living.
Putin admitted Russia faced “difficulties” but denied these were linked to what he referred to as the country’s “special military operation” in Ukraine and said the economy had “better dynamics than forecast by some experts”.
The country had to ensure incomes remained above subsistence levels, Putin said at a state council meeting.
Prices of food and other basic items in Russia jumped in the days following Moscow’s invasion of Ukraine, when the rouble weakened substantially. While the rouble has rebounded prices have not returned to previous levels.
“This year is not a simple one [but] I do not mean that all these difficulties are due to this special military operation. Because in countries that are not conducting any operations, across the ocean in the US, in Europe, the inflation is similar,” Putin said.
He suggested that Russia’s minimum monthly wage be increased 10 per cent to Rbs15,278 ($273) from June 1, while pensions for non-working retirees will rise by the same amount. “This will strengthen domestic demand . . . for local products,” he said.
Putin also asked the government to increase pay for soldiers in Ukraine.
Putin said he did not expect Russia’s inflation to rise above 15 per cent this year, despite the country’s central bank having earlier forecast inflation of 18-23 per cent this year and 4 per cent in 2024.
He also noted that unemployment was stable at 4 per cent, despite expectations of rises.
The higher social spending will cost Russia’s federal budget about Rs600bn ($10.5bn) this year and about Rs1tn roubles in 2023, finance minister Anton Siluanov said.
The measures come as the rouble is trading at its highest level since 2018 despite efforts by western countries to put pressure on the Russian economy.
On Thursday, Russia’s central bank is set to hold an extraordinary meeting at which it is expected to make a further cut in interest rates, which were pushed up to try to protect the economy from sanctions that followed the invasion of Ukraine in February.
Central bank governor Elvira Nabiullina said last month that she would no longer seek to tame inflation “at any cost” through rate rises but has warned the economy faces a “structural transformation” after sanctions isolated Russia from global markets and disrupted supply chains.
Higher rates helped stabilise price growth and slow consumer activity, she said, prompting the central bank to slash borrowing costs in the hope of stimulating growth.
Source: Economy - ft.com
