Putin’s back in the saddle. If only Russia’s economy were, too.

March 13, 2015, 1:31 PM UTC
Source: The Kremlin press service

He’s back! (You didn’t really think he wouldn’t be, did you?)

The Kremlin Friday showed pictures of President Vladimir Putin back in the his routine of meetings with the rest of the Russian establishment, and said he would return to the international circuit on Monday, in statements that go at least some way to addressing recent speculation over his whereabouts.

A subtext of ‘business as usual’ positively oozed out of announcements showing Putin meeting with Supreme Court head Vyacheslav Lebedev, with pictures of a familiar one-on-one setting across a table (albeit at his dacha outside Moscow, rather than at the Kremlin itself). In addition, the Kremlin press service announced Putin will meet the President of the central Asian republic of Kyrgyzstan in St. Petersburg on Monday.

They’re the kind of banal, everyday announcements that wouldn’t gain any attention normally, but got plenty Friday morning after Putin cancelled a number of official engagements this week without a convincing explanation from his team.

The meeting with Lebedev will have reminded him, in case he’d forgotten, that the country’s economy is still badly struggling. In published remarks, Lebedev said he expected a “difficult year” due to a sharp rise in bankruptcy proceedings and debt defaults.

Credit has dried up badly since the Central Bank was forced to raise its key interest rate to 17% in December to defend the ruble as oil prices–traditionally the Russian currency’s biggest prop–collapsed. The ruble has recovered around 15% this year, and the Central Bank cut its key interest rate for the second month running Friday, by 1 percentage point to 14%. The bank said that the balance of risks to the economy is still to the downside, but that inflationary pressures had fallen since February due to a sharp fall in consumer spending. Inflation is currently running at 16.7% due mainly to the ruble’s fall and to Russia’s own sanctions on European and American food imports, which have driven food prices up particularly sharply.

Stability, of a sort. The ruble’s exchange rate vs. the dollar Source: investing.com

The central bank’s squeeze has already claimed some prominent victims. The country’s largest residential building company, SU-155, defaulted on its bonds last week and is being pushed into bankruptcy proceedings by the Russian unit of France’s Societe Generale SA (SGCLY). PepsiCo Inc. (PEP) said last week it would close one of its largest juice factories in the country, and the Association of European Businesses in Russia said this week that car sales were down 38% year-on-year in February.

The country’s second-largest bank, OAO VTB, said Friday its profits collapsed to 800 million rubles ($13 million) last year from over 100 billion rubles in 2013, thanks to a surge in provisions against loan losses (the result was still flattered by some impressive accounting acrobatics). The bank, which is majority state-owned and is the subject of E.U. and U.S. sanctions, is due to get another $5 billion bailout from Russia’s rainy-day funds this year, an amount which chief executive Andrey Kostin said will cover its expected losses in 2015. That comes on top of 314 billion rubles in fresh capital from state funds last year.

VTB, which locals joke stands for “Vechno Tonushy Bank” (The Ever-Sinking Bank), has stumbled from one calamity to another in recent years as a result of losses on several–often politically-driven–grand initiatives. These have ranged from the acquisition of Bank Moskvy to a disastrous expansion into Ukraine (while Viktor Yanukovych was still president). It has also had to shrink its investment bank dramatically after international interest in Russian capital markets and M&A evaporated against a backdrop of the Ukraine crisis and the collapse in oil prices. Its shares are down 72% since the start of 2011.