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The current crisis in the Russian economy can be called a crisis of demand - not enough spending by the population, says the head of the Ministry of Economy Maxim Reshetnikov. According to him, now in the Russian economy there is a risk of unwinding a "deflationary spiral". The reason for this is the “re-strengthening of the ruble”.

“At present, what we call a demand crisis is developing in our economy, when not enough enterprises, consumers, and the population spend money in the economy,” the head of the Ministry of Economy said on the air of the Russia 24 TV channel (quoted by Radio Sputnik). According to him, this trend is observed based on the analysis of weekly data from cash registers. Maxim Reshetnikov explained that their level is "10% lower than the so-called reference week" - the period from February 13 to 19.

“Against the background of all this, there were fears that we could break into a deflationary spiral, when we have a reduction in money in the economy leads to a reduction in production, lower prices, and so on,” Mr. Reshetnikov said (quoted by Interfax). According to him, "an additional manifestation was the re-strengthening of the ruble."

In his opinion, it is “very good” that in addition to lowering the key rate, the Central Bank gave a “powerful signal” to the Russian economy that the issue of lowering will be considered further. According to the forecasts of the head of the Ministry of Economy, they will return to it in early June.

Yesterday, May 26, Mr. Reshetnikov said that the high exchange rate of the ruble makes Russian products uncompetitive in the foreign market. According to him, Russia needs to return to the former equilibrium exchange rate of the ruble. “Now we are saying that we need import substitution, but if we say that such a course will be in the long term, then business will not launch any import substitution projects, they will be uncompetitive,” Maxim Reshetnikov said.

On the same day, the Bank of Russia decided to lower the key rate from 14% to 11%. After that, the ruble on the Moscow exchange began to fall sharply in price. After the opening of trading on May 27, the dollar rose above 67 rubles/$ for the first time since May 12. The euro was trading around 71 rubles/€.