Ruble collapse more dangerous that sanctions says economist

The ongoing collapse of the Russian ruble could pose a greater threat to Latvia's own economic wellbeing than the mutual sanctions regime already in place, Latvian Central Bank (LB) economist Andris Strazds said Wednesday.

Speaking to LTV's Rita Panorama news show, Strazds said extreme exchange rate fluctuations created numerous problems, among them the fact that Russians might no longer be able to afford imported goods.

That in turn woulld create problems for Latvian exporters who might be forced to reduce prices to such a level that their products ceased to be profitable.

Potentially, the impact of exchange rate imbalance could be greater than the problems created by sanctions, Strazds said.

Speaking as a crucial budget debate got underway in Saeima, Strazds warned that budget revenues might be affected. 

"It could have the effect that we have budget revenues that are a bit lower than expected. By "a bit" I mean a few tens of millions [of euros], though that does not add up to a very substantial additional deficit," Strazds said.

"However, we should be aware that perhaps not all the money we have agreed to share out next year will be there," he said.

"We see that very important now is to maintain trust," Strazds said.

"We see now that the budget is based on a few slightly optimistic assumptions, but in general we can look positively towards next year purely from a financial stability perspective."

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