The Russian economy is prepared to rebuff a new wave of the crisis, Russian President Vladimir Putin told TASS in an interview on Friday before flying out to the G20 summit.
“Yes, it’s ready. We are considering all scenarios, including the so-called catastrophic decline in energy prices, which is quite possible, and we admit it. The Ministry of Economics and the Ministry of Finance, and the government consider the development of the economy in each of these scenarios,” Putin said.
The Russian economy heavily relies on its oil and gas industries. In fact, a $US20 per barrel decline in oil prices leads to a 1.75pp drop for Russia’s GDP after the first year of the shock, according to a research note from Societe Generale’s Michala Marcussen.
The price of brent crude oil recently fell below $US80 per barrel, down from around $US115 earlier this summer.
“A country like ours,” he said, has an easier time coping with “the situation.”
“Why? Because we are producers of oil and gas and we handle our gold and currency reserves and government reserves sparingly. Our reserves are large enough and this allows us to be sure that we will meet our social commitments and keep all the budgetary processes and the entire economy within a certain framework,” Putin said.
Those without reserves would struggle in a situation like this, he added.
However, Putin does not believe that it is the right time to use these reserves in order to “warm up and speed up” the Russian economy.
“I don’t think so. We were ready to use them, anyway, even before all the negative events. […] We talked about the possibility of using the funds from the National Welfare Fund. We didn’t just say this yesterday; we talked about this two years ago,” Putin added.
If it came to it, Putin said the reserves would be used for areas such as infrastructure development.
“But this doesn’t mean that we should just use these reserves thoughtlessly without waiting for an adequate economic returns. [Using the reserves] only to resolve the current issue — this we will not do.”
You can watch the whole interview at “Vesti” here.