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

Russian 100-ruble banknotes lie on the cashier’s desk in a supermarket in the Siberian city of Tara in the Omsk region, Russia, December 14, 2021. The photo was taken on December 14, 2021. REUTERS / Alexey Malgavko / File Photo

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

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

“When I say ‘difficult’, this does not mean that all these difficulties are related to the special military operation,” Putin said at a televised meeting of the State Council in Moscow.

“Because in countries that do not conduct any operations – for example, abroad, in North America, in Europe – inflation is comparable, and if you look at the structure of their economies, even more so than ours.”

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

The pension increase will take effect from June 1, while the minimum wage will be raised on July 1. Analysts said these steps would not prevent a sharp decline in real income.

Putin — whose popularity has jumped more than 10 points since the start of the Ukraine crackdown to 82%, according to an independent Levada Center poll in April — pledged in March to reduce poverty and inequality this year despite heavy Western sanctions and soaring inflation. .

The Russian economy has been bombarded by an unprecedented barrage of Western sanctions imposed over its decision to send troops into Ukraine on February 24, with consumer prices soaring and foreign companies abandoning Russia en masse as trade becomes nearly impossible.

The increase in social payments will slow but will not prevent a decline in Russians’ real income, wages and pensions – after taking inflation into account, the Research Institute and Experts of VEB Bank said.

Even with a 10% increase in minimum wages and pensions, VEB expects the real disposable income of Russians to fall by 7.5% and real wages to fall by about 6% this year. VEB also expects the poverty rate to rise to 12.6% this year from 11% in 2021.

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

The increase in wages and pensions may add to the inflationary pressures that the central bank tried to cover by raising an emergency rate to 20% in late February, as the foreign currency depreciated the ruble. It has lowered its price twice since then as the ruble recovered.

Finance Minister Anton Siluanov said the measures would 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 off-schedule policy meeting on Thursday, with analysts expecting it to cut the benchmark interest rate from 14% to 9.5% where it stood before the intervention in Ukraine.

Reporting by Reuters. Editing by Mark Trevelyan and Kevin Levy

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