Low exchange rate limits production capacity of economy – Central Bank Department

By supporting labor-intensive tradable industries, weak currency subsidizes economic sectors with low labor productivity at the expense of the rest of the economy

MOSCOW, May 15. /TASS/. Low exchange rate restricts production capacity of the economy, according to the analytical note of the Research and Forecasting Department of the Russian Central Bank.

“By supporting labor-intensive tradable industries, weak currency subsidizes economic sectors with low labor productivity at the expense of the rest of the economy. This, in turn, preserves production structure by not allowing resources to move to more productive labor-intensive or capital-intensive industries. Enterprises in such industries, have weak incentives to increase labor productivity,” the regulator said.

 

 

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