What Is The Current Economy Of Russia – A Russian ruble coin is seen in broken glass, displayed over the flag of Russia, in this illustration taken on February 24, 2022. / Dado Ruvic / illustration / File Photo Acquire licensing rights
LONDON, March 25 () – Russia’s invasion of Ukraine on February 24 triggered draconian sanctions that took the country out of the global financial system and crippled its economy.
What Is The Current Economy Of Russia
A month later, the Russian currency lost much of its value and its bonds and stocks were removed from the indexes. People are experiencing economic hardship that will last for years.
The Ruble Currency Storm Is Over, But Is The Russian Economy Ready For The Next One?
According to the World Bank, Russia was the world’s 11th largest economy in 2020. But by the end of this year, it could take 15th place from the ruble by the end of February, according to Jim O’Neill, a former Goldman Sachs economist , behind developing countries like Brazil, Russia, India and China.
A recession seems inevitable. Economists surveyed by the Central Bank predict that this year the fall will be 8% and inflation will reach 20%. Learn more
The forecasts of economists outside Russia are even bleaker. The International Financial Institute forecasts a 15% drop in 2022, followed by a 3% drop in 2023.
“Overall, our projections suggest that current events will erase about 15 years of economic gains,” the IIF said in a note.
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Since taking office in 2013, central bank President Elvira Nabiullina’s biggest victory has been containing inflation from 17% in 2015 to just over 2% in early 2018. While pressure on As prices intensified in the months following the pandemic, he beat the industrialists by raising interest rates. for eight months.
Annual price growth accelerated to 14.5% and is expected to be 20% higher, five times higher than the target. Household inflation expectations for next year are above 18%, an 11-year high.
With Russian reserves frozen abroad, Nabiullina was forced to more than double control of interests and capital on February 28. The Central Bank expects inflation to return to the target level only in 2024.
The sanctions force index providers to exclude Russia from benchmarks used by investors to funnel billions of dollars into emerging markets.
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JPMorgan (.JPMEGDR) and MSCI are among those to announce the removal of Russia from bond and stock indexes (.MSCIEF), respectively.
Russia’s ranking in these indicators has already taken a hit after the first round of Western sanctions in 2014, followed by the poisoning of a former Russian spy in Britain in 2018 and the 2016 investigation into interference Russian in the American elections.
When Russian troops invaded Ukraine, their country enjoyed the coveted “Investment Grade” credit rating from the three major agencies, S&P Global, Moody’s and Fitch.
Over the past four weeks, Russia has seen the biggest downgrade in its sovereign rating. It is now at the bottom of the rating scale, indicating imminent default risk.
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A month ago, the average one-year ruble exchange rate was $74. Trading on various platforms showed high liquidity and expected bid/ask spreads for major emerging market currencies.
All that has changed. Deprived of much of the central bank’s hard currency reserves, the ruble has fallen to a record low of more than 120 to the dollar locally. In offshore trading, it fell to $160.
As liquidity dried up and the bid-ask spread widened, the price of the ruble became erratic. The exchange rate has not yet found an equilibrium onshore and offshore. On August 9, 1999, Putin emerged from obscurity and became Prime Minister. In six months he will be president. Kremlin.ru
Last week, President Vladimir Putin celebrated 20 years in power. Let’s look at the numbers and see how the country has changed under his leadership.
Russia Economy: Population, Gdp, Inflation, Business, Trade, Fdi, Corruption
On August 9, 1999, Putin emerged from obscurity and became Prime Minister. Six months later, Boris Yeltsin left the presidency and Putin gradually took his place.
That was always the plan. Russia is still reeling from the aftermath of the collapse of the Soviet Union and the 1998 financial crisis, during which Russia defaulted on $40 billion in GKOs, or federal treasury bonds, that foreign investors in the big banks have seized.
Russia has been empowered by what academics Barry Ickes and Clifford Gaddy call the “virtual economy.” The payment system collapsed due to hyperinflation that hit the country after price liberalization by Yevgeny Gaidar, Russia’s first post-Soviet prime minister.
GDP growth has been negative for ten years, including several months in 1998. The government was plunged into a permanent budgetary crisis. As life expectancy and income declined, poverty increased. Our “despair index” (the sum of inflation and unemployment added to the proportion of people living in poverty) reached astronomical levels by 1440 – ten times worse than the rest of the old socialist union.
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However, Putin was incredibly lucky. The 1998 crisis was caused by a drop in oil prices due to the Asian crisis of the previous year. However, by 2000, oil prices had fallen back below $10 per barrel, peaking at around $150 over the next decade. The influx of petrodollars made rebuilding Russia much easier, but Putin didn’t waste the money, he used it to build a new country.
Putin is behind the first systematic effort to reform the Russian economy. In 2000, he launched the Gref plan (“Program for social and economic development of the Russian Federation for 2000-2010”), named after German Gref, then Minister of Economy and current CEO of Sberbank. However, the 2008 crisis did not make it possible to realize this plan since only 30% was implemented. Putin’s first term as president was filled with theft, but real progress was made, with the Russian economy well ahead of the rest of the Commonwealth of Independent States (CIS).
The numbers clearly show mixed results, given that the work to transform Russia into a modern, efficient market economy is far from over. Below, we select important indicators and divide them into three main categories: macroeconomic, social and quality of life.
Russia has a large economy, but the fall of the Soviet Union saw its value and share in the global economy decline. Much of this collapse occurred under Yeltsin’s leadership, but as the chart shows, Russia’s share of the global economy quickly recovered after Putin came to power, growing from ‘around 2% to 4%. The global financial crisis of 2008 ended this process and the Russian economy began to stagnate after 2013, a slowdown exacerbated by the fall in oil prices in 2014.
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Between 1999 and 2008, Russia’s GDP increased by 94% and GDP per capita doubled. The value of the economy increased from $210 billion in 1999 to $1.8 trillion in 2008. Now stagnant, the economy is not expected to return to $1.8 trillion before 2023.
Looking at Russia’s share of global GDP, Russia is back where Putin started in the late 1990s. Russia’s role in the global economy reached its peak in 2008, but it now risks being left behind while the rest of the world is growing faster than Russia.
There was no growth under Yeltsin. The economy has been in decline for ten years. But this changed suddenly and radically after Putin came to power. One of the benefits of the 1998 crash and devaluation was to remonetize the economy and eliminate the “virtual economy.” As people started using cash again, petrodollars began to flood the economy. In 2000, GDP growth was 10%, as the economy recovered from collapse – a record. The two crises of 2008 and 2014 constituted major shocks for the economy.
The upward trend through 2008 mainly reflected increases in housing and consumption, driven by rising oil prices. After 2014, consumer demand stagnated and fixed investment was also negative as the Russian economy entered a post-oil growth phase and faced a deep structural crisis. problems.
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Russia now finds itself in the fourth phase of post-Soviet transformation (first: the collapse of Yeltsin in the 1990s; second: the rise of oil-fueled conflicts; third: economic stagnation in 2013, when the oil model ended), with Putin’s decisions. of May and 12 national projects. trying to create a new economic model that promotes growth based on supply-side investments rather than demand-side investments.
The first is that Gref’s plan was implemented shortly after he took office, culminating in the 2008 crisis.
Then there was the concept of long-term socio-economic development of the Russian Federation until 2020, but it was never implemented due to the global crisis.
In January 2011, Putin instructed the Higher School of Economics and the Presidential Academy of National Economy and Public Administration to prepare a new strategy for 2020, which resulted in the so-called first cycle.
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