REUTERS
The exchange rate above RUB 80 to the dollar will result in a more tangible inflation, and the budget will not sustain social programs, that’s according to the chief economist at Alfa Bank, Natalia Orlova, who spoke with the Economy Times online newspaper.
"Strictly speaking, this is the limit not only for the economy, but for the budget as well. Because the rate of more than RUB 80 to the dollar will result in a more tangible inflation,” said the expert.
“With the concept we talked about (when we have quite a tight budget, but we are trying to somehow support the real sector), we can only implement tight fiscal policy - such as when there is only a 4% indexation of pensions when the inflation is at 8-10%. But when it’s a solid 15% for two years, it's another thing,” she said.
“There is a certain inflection point, up to which we can keep telling the state employees and retirees that their incomes will grow by only 4%, because there is an expectation that further inflation will decline. If inflation is not reduced, it will have to be compensated for the past year and also for the next one,” reads the article.
Read alsoChinese banks make Russian clients close accounts The expert goes on to say that the state will have to move from a 4% indexation to a 5-10%, or perhaps a 15% indexation.
It is impossible, according to the expert, to “save” on the budget by constantly shrinking social spending. There will be a point when there must be some expenditures. The population can remain tolerant for one or two years, but this cannot last forever, “after all, there is a political cycle."
Read alsoRussia presents new arguments against compensation to former Yukos shareholdersAccording to Orlova, nothing has actually been reshaped in Russia. "We have producers react to the inflation with raised prices, because they have no capacity, while the people, in fact, just pay for the crisis," she said.