Putin raises Russian pensions, reduces Ukraine's impact on the economy

Putin raises Russian pensions, reduces Ukraine’s impact on the economy


Russian 100-pipe banknotes are placed at the cash register of a supermarket in the Siberian city of Tara in the Omsk region, Russia, on December 14, 2021. Picture taken on December 14, 2021. REUTERS / Alexey Malgavko / File Photo

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LONDON, May 25 (Reuters) – President Vladimir Putin on Wednesday ordered a 10% increase in pensions and a minimum wage to ease the Russians from inflation, but denied that the country’s economic problems were all linked to the war in Ukraine.

With annual inflation close to 18%, the Kremlin leader last month acknowledged that 2022 would be a “difficult” year for the Russian economy.

“When I say ‘difficult’, it does not mean that all these difficulties are associated with a special military operation,” Putin told a state council in Moscow.

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“Because in countries that do not carry out any operations – say overseas, in North America, in Europe – inflation is comparable, and if you look at the structure of their economies, it is even higher than ours.”

His comments ignored the fact that rising inflation in Western economies is partly a direct result of the Russian war in Ukraine, which has driven up energy and food prices around the world.

The pension increase will take effect on 1 June, with the minimum wage increase starting on 1 July. According to analysts, these steps will not prevent a sharp decline in real incomes.

Putin, whose rating has jumped more than 10 points to 82% since the start of the Ukrainian campaign, said in a March survey by the independent Levada Center in March that it would reduce poverty and inequality this year despite crippling Western sanctions and high inflation. .

The Russian economy was shaken by the unprecedented influx of Western sanctions imposed on its decision to send troops to Ukraine on February 24, consumer prices rose sharply and foreign companies left Russia en masse as trade became almost impossible.

The research and professional audit institute of the VEB bank stated that the increase in social payments will slow down, but will not prevent the decline in real incomes, wages and pensions of Russians – after inflation.

Even with a 10% increase in the minimum wage and old-age pensions, VEB expects that Russia’s real disposable income will fall by 7.5% this year and real wages will fall by almost 6%. VEB also expects poverty to rise to 12.6% this year from 11% in 2021.

Russia’s minimum wage is currently 13,890 rubles ($ 250) a month, while the average old-age pension is 18,521 rubles a month.

Wage and pension growth may add to the inflationary pressures that the central bank has tried to cap by raising rates to 20% at the end of February as the ruble’s exchange rate has fallen. It has lowered the exchange rate twice since then when the ruble has recovered.

Finance Minister Anton Siluanov said that these measures will cost the federal budget about 600 billion rubles ($ 10.5 billion) this year and about 1 trillion rubles in 2023.

The central bank is set to hold an unscheduled political meeting on Thursday, where analysts expect it to cut the key interest rate from 14% back to 9.5%, where it was before the intervention in Ukraine.

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Reuters report; edited by Mark Trevelyan and Kevin Liffey

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