Russia’s Prime Minister Dmitry Medvedev is trying to portray the glass as being half full when it comes to the state of the economy.
With the rouble having lost 63 percent of its value against the dollar, and 45 percent of its value against the euro this year, Medvedev admitted there were tough times ahead and that the Kremlin might have to review its budget for the coming year.
Interviewed on Russian television, he said: “If economic conditions substantially change, we will have to review the economic scenarios and, in the final analysis, the budget itself. But we are not doing this for the moment.”
On the currency he also tried to be upbeat: “The substantial weakening of the rouble is not advantageous for our economy, but most economists and analysts share the view that right now the rouble is undervalued by too great a degree. It’s obvious that some sort of revaluation is coming. I don’t know whether that will be this month, or in a month’s time, but in any case, some sort of balance will be reached.”
The Russian economy has been hard hit by the EU and US sanctions imposed over the Ukraine crisis and the weakening rouble is making it harder for businesses to operate.
Medvedev said Russia needs to diversify its economy, reducing the reliance on energy exports, which makes it vulnerable to falls in the global price of oil. That diversification would take more than a decade to complete, he said.
Earnings from oil and gas exports are a significant part of Russia’s budget.
As Medvedev spoke Brent crude was near $65 a barrel. That is way short of the $100 a barrel Russia needs to cover the cost of running the country.