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Topline

Russian President Vladimir Putin painted the Russian economy in a flattering light during his televised Thursday update, bragging about the ruble’s recent rally and the country’s inflation compared to its peers, but Putin’s messaging was misleading at best as Russia’s economy shows clear signs of fracture following its isolation from much of the global economy as punishment for its invasion of Ukraine.

Key Facts

Putin said the exchange rate of the ruble is “strengthening” and “probably” has the “best dynamics” of any currency globally, according to a translation of his comments provided by the state-run RIA Novosti news agency.

Putin isn’t wrong about the ruble’s performance – the ruble is up more than 11% against the U.S. dollar year-to-date, making it the best performer among the 31 currencies tracked by Bloomberg.

However, market experts and Western governments assert the ruble’s performance is due to the Russian government artificially propping up the currency through capital controls, and experts say the change isn’t an indication of the Russian economy’s true performance (the IMF and World Bank project Russia’s GDP to contract by 8.5% and 11% this year, respectively).

In his Thursday speech, Putin pointed to Russia’s price growth rising only .1% over the last week, according to RIA, and the state-run TASS news agency reported Putin stressed how this compared to worsening inflation in Europe, claiming some European countries are nearly at 20% annual inflation.

This claim is far more misleading: Russian annual inflation was 18% in April, according to the Russian central bank, far outpacing the 7.5% annual inflation rate in April reported by the European Union.

Crucial Quote

Craig Erlam, senior market analyst at the OANDA foreign exchange platform, told German new outlet DW: “The currency moves don’t represent the fundamentals of Russia. More often than not, you see the fundamentals reflected in the currency. But as soon as capital controls are put in place, then that obscures the picture.” U.S. Secretary of State Antony Blinken said last month the ruble is under a “lot of manipulation.”

Key Background

The ruble plunged in the early days of Russia’s invasion of Ukraine, hitting a record low of 139 against the dollar in early March, before recovering rapidly, trading at 62.5 rubles to the dollar Thursday, its highest level in more than two years. In addition to rising energy prices on the global market, the recovery can be attributed to several policies from Russia’s central bank incentivizing citizens to hold rubles, including barring foreign currency sales and raising the interest rate to 20% February 28.

Big Number

79%. That’s how much Russian car sales fell in April compared to April 2021, according to data from the Association of European Businesses trade group. The car sales data provide a look at how strong the impact of hundreds of foreign manufacturers’ exiting Russia is, though Putin noted Russian manufacturers are “filling in” for multinational companies that exited Russia in protest of its invasion of Ukraine in his Thursday speech, according to TASS.

Surprising Fact

The euro is at its lowest level against the dollar in five years, trading at 1.04 Thursday, a 14% decline since the start of 2022. Uncertainty on the continent related to the war, including rising prices as Europe weans itself off Russian energy, are contributing to the euro’s dip.

Further Reading

Analysis: Russia’s rouble rebound is not as real as it seems (Reuters)

Ruble Surpasses Brazil’s Real as Year’s Best-Performing Currency (Bloomberg)

If you think inflation’s bad where you live, have a look at Russia (CNBC)