March 11, 2020 / 2:41 PM / 22 days ago

UPDATE 1-Russian officials play down risks of falling rouble and oil

(Adds officials’ comments, background)

MOSCOW, March 11 (Reuters) - The Russian economy is not at risk of contracting in 2020 and consumer inflation is unlikely to accelerate above the target, First Deputy Prime Minister Andrei Belousov said on Wednesday, playing down concerns about the rouble hitting a four-year low.

The rouble crashed this week after a global deal on cutting global oil output unexpectedly fell apart, sending oil prices, the mainstay of Russia’s economy, into a tailspin.

President Vladimir Putin ordered on Wednesday that the central bank and the government make sure that “any negative developments, linked to this processes, are minimised”, RIA state news agency reported.

“I’m confident that Russia will get through this turbulent period with dignity and calmly,” Putin said, adding that key industrial sectors would emerge from the situation significantly stronger, RIA quoted him as saying.

The Russian officials speaking out in support of the economy in the past days have not elaborated on measures they would take to avoid a contraction and to keep inflation at check, but highlighted the country’s reserves of around $570 billion.

The central bank has already started its first FX intervention since 2015 to support the rouble in a pre-emptive move to ensure financial stability.

A weaker rouble usually spurs inflation as prices for imports climb, while also choking on investment activity as companies prefer to minimise currency risks instead of focusing on their business.

Belousov said prices for pharmaceuticals and home appliances are at risk of increasing, Russian news agencies reported.

But he said there was no evidence that a “second wave” will hit markets, already hammered by low oil prices and uncertainty due to the coronavirus outbreak. Russia has so far reported 20 confirmed cases of the disease but no deaths.

Belousov also told reporters there were no signs of a possible economic contraction this year, according to TASS.

Belousov said that inflation would be at around the central bank’s 4% target this year, without exceeding it.

Before the crash in oil prices and the rouble, which may hurt already tepid investment activity and thwart Putin’s plans to raise living standards in Russia, 2020 economic growth was seen at around 2%. (Reporting by Darya Korsunskaya, additional reporting by Maria Tsvetkova and Alexander Marrow; Writing by Andrey Ostroukh; Editing by Alison Williams)

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