MOSCOW, March 15. /TASS/. A dramatic increase of the key rate by the Bank of Russia can be prevented if the new coronavirus spread is managed to be halted by summer, Chief Executive Officer of VTB Bank Andrei Kostin said on the air with the Channel One.
"Everything depends on the length of the coronavirus combating process. If we get over it by summer, we can well avoid the dramatic increase of the key rate," the banker said.
The rate increase in the current environment is quite expected but a drastic measure, because it will significantly influence on the national banking system, Kostin said. "If major developments continue in the situation, then such measure as the key rate increase by the Central Bank should not be excluded. Certainly, this will contributes to growth of rates in the market at large," he noted.
Risks of the aggravated coronavirus situation in Europe, which is among critical economic partners of Russia, should not be afraid of because China, the no less important partner, can return to the global market soon, the chief executive said. "I believe if intensification of crisis in Europe coincides with China’s recovery from the coma and with the restoration of production and trading chains with it, then the risk will be counter-balanced," Kostin added.
The Russian government will have the power to counter problems occurred due to the current situation with the virus spread, the chief executive said. "I expect fairly quick and efficient solutions from the Russian government. It seems to me we have an appropriate government to cope with these tasks," he added.
The coronavirus outbreak occurred in late 2019 in Central China has spread to over 120 countries and territories and was recognized as a pandemic by the World Health Organization (WHO) on March 11. According to WHO, over 140,000 individuals worldwide got infected and over 5,000 died. 59 infection cases were registered in Russia.
Financial system
The Russian financial system is sufficiently stable to withstand such external shocks as the new coronavirus spread and volatility on markets, Chief Executive Officer of VTB Bank Andrei Kostin said on the air with the Channel One.
"I am highly confident that our financial sector stable. Much was done for that, a lot of money was spent, including by the Central Bank. I do not see problems with meeting all the commitments to citizens that we have. It seems to me that we will cope with coronavirus and that the financial system will stand out," Kostin said.
The largest oil producers are not interested in an abrupt and long-term drop of oil prices and moves towards market stabilization, the banker said. At the same time, "one more decline on the Russian financial market" is not ruled out if the situation with the coronavirus spread does not demonstrate an improvement trend, Kostin noted.
"Analysts predict at present that the average oil price by the year-end can be about 40-45 [dollars per barrel - TASS]. This is approximately what Russia needs to have a deficit-free budget; therefore, Russia can hold ground for quite a long period of time. Oil production and consumption will be affected by the period of the coronavirus to last," the chief executive said.
Such industries like transport, hotel business, and tourism will require extra support measures from the government, the banker said. "I think all that will be done," Kostin said.
"Even if the ruble fluctuates, the Central Bank has a range of measures. The ruble, as it was during the economic crisis of 2008, will gradually restore its positions," he added.