Russian President Vladimir Putin has ordered his country’s central bank to lower borrowing costs for productive companies, according to the Kremlin website.
Reuters reports that Russia’s central bank has been following an anti-inflationary policy and therefore has not cut interest rates for over a year. The feeling has been that such a move would increase inflation and be of no benefit to long-term growth.
However Putin has directed the bank to move towards "stimulating a lowering of the level of interest rates on rouble loans provided to organizations active in the productive sphere".
The Russian economy is heavily dependent on commodity exports and Russian policymakers are not happy with the small role of manufacturing in the economy.
Putin favours a reduction of borrowing costs for ‘productive’ companies. Central bank Governor Elvira Nabiullina will be required to present proposals as a response to this directive by September 1.
Russia has been grouped along with other emerging economies Brazil, India, China, and South Africa (in the BRICS group) and, in that light, its economic performance is often seen as poor.
As Forbes points out, Russia’s performance does not compare very well with those economies in terms of GDP growth. However, when compared to other Eastern European nations, its performance is very similar.