Russia is facing a labor shortage for the first time in its modern history, Central Bank Governor Elvira Nabiullina said Thursday, warning that an overheated economy is driving inflation and complicating interest rate policy.
Speaking at the Moscow Exchange Forum, Nabiullina said Russia’s unemployment rate remains at a historic low of 2%. The lack of available workers has forced employers to raise wages to compete for staff, which in turn has increased production costs and consumer spending power.
“This is a new reality for the government and for business alike,” Nabiullina said. “In the past, high-rate cycles were tied to temporary external shocks, and once things stabilized, we cut rates fairly quickly.”
“Now, however, we are facing a persistent downturn in external conditions affecting both exports and imports,” she said.
Russia’s Central Bank had previously pointed to a slight increase in the available workforce as a reason for lowering its key rate from an all-time high. However, Nabiullina warned last year that the lack of workers remains a primary threat to price stability, alongside high consumer spending.
On Thursday, Nabiullina also cited persistent inflationary pressure caused by supply chain disruptions in the Strait of Hormuz. The narrow waterway, through which a fifth of global oil supplies normally passes, remains effectively closed due to the U.S.-Israeli war on Iran.
Nabiullina’s remarks come ahead of the Russian Central Bank’s next interest rate meeting scheduled for April 24.
On Wednesday, President Vladimir Putin ordered top economic officials to develop new measures to stimulate growth after the economy contracted by 1.8% in the first two months of the year, falling short of government forecasts.
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