Stagnation

The Moscow Times reports:

“The decline of the Russian economy has slowed, according to the State Statistics Service.”

However,

“The Economic Development Ministry has forecast that GDP would drop by 0.6 percent in 2016 and increase by 0.6 percent in 2017. At that rate, the Russian economy would rebound to the level of 2014 no sooner than 2020. The baseline scenario for long-term forecast assumes stagnation…”

Meanwhile:

“…former Finance Minister Alexei Kudrin said that the macroeconomic situation has improved and that the focus has shifted to the microeconomic level where reforms are needed.”

In separate comments, Kudrin “…compared the situation in today’s Russia to the late Soviet period. According to him, Russia is now facing the same risks – decentralization and the regionalization of the country…”

“The USSR collapsed not due to a weak army and not in connection with a weak KGB. It collapsed because it was an inefficient, bereft economic model.”

Kudrin also said that “…the main risks [for Russia today] are economic inefficiency and the inability to be technologically advanced.”

According to the Economic Development Ministry’s target scenario, economic growth will exceed 4 percent annually as early as 2018 — but only if Russia makes the transition to an investment model by which companies achieve increased revenues through lower costs, an improved business climate, and support from non-raw materials exports.

“One federal official points out, however, that effective investment does not consist of simply laying pipes in the ground or building bridges that go nowhere. The problem is that the crisis is affecting actual projects that under way, and fiscal policy is skewed away from supporting investment in infrastructure and human capital and toward social and defense spending.”

And that is exactly what Russia’s 2017-2019 budget is proposing:

To put that in context:

In a poll published last week, 48% of Russians said the economic situation has worsened in recent years. This is compared to 37% who said they thought so when asked the same question in September.

Almost 32% of respondents thought that the situation in the country will get worse in the next year or two. And another 13% of those polled thought the crisis will last more than two years.

3/4 reported that they were affected by the crisis, and more than 27% of respondents stated that they have been hit hard by the recession. An increasing number of Russians are afraid of losing their jobs, and complain about pay cuts and wage arrears. Rosstat says that total wage arrears in Russia increased by 3.6% between 1 Sept & 1 Nov, reaching 3.79 billion rubles.

Russians continue to save money on food, clothing, & shoes, as well as entertainment. 24% said they have reduced spending on medication. Saving on consumption remains the main form of adaptation to the crisis. People have begun to stockpile food. Nearly 31% said they are gardening more at their dachas. But only a few Russians have said that to combat the crisis, they have found a second job or some part-time work.

People have adapted to the weak economy and are prepared for a long life under poor conditions. But a sociologist told Vedomosti that the crisis would not have a negative impact on the government, as “the population resides in apathy.”

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