In an unusual revelation for Russia, one of Vladimir Putin's allies – Sergey Chemezov predicts the collapse of the Russian economy, reported Focus.de.
The CEO of the state-owned corporation “Rostech”, responsible for some of Russia's weapons, made this grim prediction before the Federation Council, writes business-gazeta.ru. He fears that most Russian companies may go bankrupt due to increasingly high interest rates.
During his speech, Chemezov particularly criticized the high key interest rate of the Russian Central Bank, which was raised by another two percentage points to a record 21 percent.
The Russian central bank notes that it may raise its key interest rate again at its next monetary policy meeting. Russia's central bank announced it was raising its key interest rate from 19 to 21 percent, the highest level since 2003, in an effort to curb high inflation.
Russia is threatened by high unemployment and rising prices, Chemezov pointed out. “If we continue like this, practically most of the companies will go bankrupt,", he warned.
He added that high-tech companies with longer production cycles are particularly affected because they receive only 30 to 40 percent upfront payments from customers and must cover the rest with a loan. At the same time, he pointed out that high borrowing costs end up eroding their profit margins. Chemezov stressed that this situation could lead to “stagflation”, that is, an economic situation with slow growth, high unemployment and rising prices.
Chemezov's concerns echo recent comments by other Russian businessmen, who have also warned that high borrowing costs could hurt Russia's economic growth. Russian billionaire Alexei Mordashov, the largest shareholder in Severstal, said earlier that the situation was uncertain. "The need to raise interest rates to curb inflation is clear, but we are starting to go too far," Mordashov said, quoted by Reuters. “We are entering a situation where the medicine may become more dangerous than the disease”.
Because of its military aggression against Ukraine, the Russian economy was hit hard by Western sanctions. Although the Kremlin is trying to convince the world that the Russian economy is stable and even growing, according to analysts, the real situation is much different and gloomy for the Putin regime. The Russian economy largely works only to support the country's military, and many of the most capable men fled the country at a young age (for fear of mobilization), so Russia has to import low-educated labor.