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CEE Central Bank Governor of the Year


Elvira Nabiullina, Russia

A decisive cut in interest rates and action to stabilise the rouble have kept Russia in favour with foreign investors

While every country’s economy has been deeply affected by the coronavirus, Russia was dealt a particularly tough hand, as it faced the double impact of oil prices declining and Covid-19 costs ballooning. However, the Central Bank of Russia has been widely praised for preserving financial stability amid severe economic turbulence. Thanks to a disciplined and prudent approach over the past few years, the CBR had plenty of room to manoeuvre and swiftly implemented a more accommodative policy.

The government introduced a fiscal stimulus package and the central bank implemented temporary regulatory forbearance. Additionally, the bank deferred requirements for banks to create provisions on the loans restructured in this period and provided temporary forbearance of mark-to-market on marketable securities.

Crucially, bold action in the FX market helped to stabilise the rouble and protect it from falling into the crisis-zone and to prevent dollarisation.

“The Bank of Russia augmented the fiscal rule accelerating the adjustment of the FX market operations so that it was more in sync with daily oil price fluctuations, and also provided some incremental FX sales during those weeks when the oil price was below $25/bbl,” says Elvira Nabiullina, governor at the Central Bank of Russia.

The central bank made the wise decision to cut interest rate by 200bp this year, with key rates on track to remain at 4.25% for the rest of the year, though some have speculated about further cuts.

“Whether the decision [to cut rates] is taken depends on the state of the economy and its implications for our inflation forecast… We take into account the effects of winding down the aforementioned regulatory forbearance on the credit conditions,” Nabiullina says.

Thanks to the central bank’s action in preserving financial stability, Russian government auctions were one of the first markets to which foreign investors returned after major outflows in the first flush of coronavirus volatility.

Strong actions on the part of the central bank have put GDP growth forecasts at 3.5%-4.5% in 2021. In the case of a second wave, the central bank says it will formulate policy response with the ultimate goal of price stability and the goal of keeping inflation at 4%.

“For now we continue to see the balance of risks for 2021 as moderately disinflationary,” Nabiullina says. “But, as this year reminded us all too clearly, the situation on the ground may change very fast.”