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No holiday for Russian economy

Thursday, October 02, 2014 - 01:49

Russia's central bank has vowed not to introduce restrictions on cross-border capital and currency movements even under its worst-case scenario where oil falls to $60 per barrel. But are investors reassured? Sonia Legg reports.

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Escaping an often chilly climate is a must for many Russians. But finding a bargain trip abroad is getting much harder. TUI Travel is cutting the number of holidays it offers to Russian customers by a third. The British tour operator says the devaluation of the rouble is preventing it from raising prices. It's an example of how sanctions over the Ukraine crisis are hurting many sectors. But President Putin insists he won't react by implementing currency and capital controls. (SOUNDBITE) (Russian) RUSSIAN PRESIDENT, VLADIMIR PUTIN, SAYING: "We are aiming and will aim for Russia to develop as an open market economy. Our strategic course remains unchanged". Putin - attending an investment conference - accepted the sanctions were stopping Russia developing into a stronger economic power. But even if oil prices fall to $60 a barrel the central bank - says governor Elvira Nabiullina - will not panic. (SOUNDBITE) (Russian) RUSSIAN CENTRAL BANK GOVERNOR, ELVIRA NABIULLINA, SAYING: "It is very important to understand that the challenges we are facing are structural and long-term. That's why continuity in politics is very important. Continuity and flexibility." Not everyone is convinced the bank will stick to its guns whatever. Commerzbank's Peter Dixon says currency pressures may become hard to ignore - though Putin may still try. (SOUNDBITE) (English) PETER DIXON, GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, SAYING: "The problem is the economics are going in one direction and politics in another and I guess the question is - to what extent is Mr Putin going to be influenced by the economic backdrop and my sense is that it is going to take an awful lot of bad news before he rethinks his position." Putin's promised to support sectors hurt by sanctions and he still retains wide support in Russia. The economy may have to suffer a few more dark days before there's any change of course.

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No holiday for Russian economy

Thursday, October 02, 2014 - 01:49