EDITORIAL: The Bad News Just Keeps on Coming for the Russian Economy

EDITORIAL

The Bad News Just Keeps on Coming for the Russian Economy

The ability of the Putin administration to keep on generating such a consistent stream of bad economic news is really quite breathtaking.

Earlier this week we learned that the amount of unpaid earned wages in Russia had increased in March by nearly 10%, so that now half a million Russians are suffering from delinquent payments by their employers. Almost ten billion rubles were owed as of April 1. Meanwhile, unemployment jumped to a shocking 11.9% last month, the highest level in eight years, soaring up from 8.5% in February. Nearly 2 million Russians lost their jobs in the first quarter of this year, so that now more than 7 million are jobless.  Economists are now predicting that Russia’s unemployment rate will rise above 12% for the year.  10% unemployment is considered the threshold for major social upheaval.

Then, Deputy Finance Minister Tatyana Nesterenko warned that the national balance sheet is so much in peril from falling revenues that that government may be forced to slash spending by up to a stunning 30% in 2010, calling the goverment’s position “very difficult.”  This was a massive increase over the 10% spending cut projection given by Finance Minister Alexei Kudrin just last week. Putin said Kudrin’s figure was the result of his being “under stress” and exaggerating.  In fact, it’s obviously Putin whose head needs major work done.

Finally Vladimir Mau, who heads the Kremlin’s economic crisis task force, admitted that Russia is being crushed by inflation.  In just the first quarter of this year Russia has recorded nearly 6% inflation, putting it on pace to post 24% inflation by year’s end. Even if inflation were to remain at the same level as last year, 13%, this would be a shocking and devastating blow, since plunging commodity prices should be causing deflation.

Mau’s words were amazingly forthright and ominous, echoing the diagnosis of Alexei Kudrin last week.  Mau stated: “Inflation limits the tools of our anti-crisis policy. Many measures used in the United States and Europe are not available for us. We cannot carry out quantitative easing, we cannot use budget stimulus and we need to maintain high interest rate.”

The Russian economy has begun helplessly tracking the price of oil, something over which Russians have no control whatsoever.  It has become so emaciated and servile that it no longer has any identity separate from the commodities markets.  That, perhaps, is the most damning fact of all.

In other words, Russia is operating with an abnormal, second-rate economy that has none of the basic fundamentals it needs to deal with this crisis.  The Russians themselves — the honest ones, anyway — admit this freely.  It lacks them because the Kremlin, populated by a clan of KGB spies who know nothing about business or economics, have spent the last ten years fomenting a new cold war rather than building a vibrant and diversified economic base such as Western countries have.

 

20 responses to “EDITORIAL: The Bad News Just Keeps on Coming for the Russian Economy

  1. How gloating… If this were true…

    • Hey, aglyamoff, why don’t you put your vodka bottle down and go Google the truth for us?

      By all means, hit us with your best shot.

      We are all waiting for your counter-facts.

      Take all of the time you need.

  2. This should help keep the fleeing Moscali and others out, when the “Russian Federation Collapses; Rashan passports handed out so freely will be no good. Ukraine has passed the Law “On Introducing Amendments into Article 25 of the Law of Ukraine “On Legal Status of Foreigners and People Without Citizenship”. (…)
    In line with the law, foreigners and people without citizenship will have to produce their biometric data for recording during the procedure of entrance visa registration in diplomatic representative offices and consulate institutions of Ukraine abroad, and also when passing a passport control in state frontier admission points. The law takes effect on January 1, 2009. This should make the EU very happy as illegal persons smuggling from Russia thru Ukraine into the EU will increase with the problems. Maybe a wall should be built.

  3. aglyamoff, Your Savokian Russia has collapsed before, and will once again be a beggar standing outside of Europe. RaSSiya is doing an excellent job isolating itself already. The full effect of the world economic crisis has not reached full impact there yet. RaSSiyan’s naked butt will be exposed to the Chinese who have been lending billions. Your leaders have been giving away energy contracts for the next 20 years, and taking the money to LondonGrad. All you stupid Savoks will be left behind to face your New Masters. Europe and Ukraine will be closed to your Ilk. RaSSiya Losing One Million a year in emigration is making my point. The dumb ones like you, aglyamoff will be left behind and not welcome in civilized countries that you previously vandalized.

  4. I not good understand economics. And I can’t interpret the words of specialists. I not conform with the definition of our goverment as nonprofessional. They have good education, big experiens and know what to do. For example, our minister of economic advancement Elvira Nabiullina
    http://en.wikipedia.org/wiki/Elvira_Nabiullina
    Now there are hard times, but were worse.

  5. I never thought that this country’s economy was perfectly healthy. None the less, I believe in it to recover eventually. Only time can judge us. Let’s wait.

    LA RUSSOPHOBE RESPONDS:

    You mean wait like the USSR waited, for collapse and oblivion? Speak for yourself, most Russians would prefer not to see their country disappear.

  6. Does anybody else get the feeling that “I not good understand economics” aglyamoff just mocks the Russian obtuseness. One can’t be such an idiot and not realize that. It’s gotta be a hoax!
    ‘fess up, aglyamoff – then we can have a real discussion, whether it was funny or not!

  7. Is keeping interests rates high really necessary to keep Russian inflation from getting worse? I thought that richer nations played this game because they worried that growth would get too fast, labour supply would dry up and companies would have to spend more getting the people to run things which would cause prices to rise. Russia has no such excessive growth or shortage of unemployed people so why would they need to high interest rates? I am no economist so feel free to explain it to me like you would to a cat.

    Come to think of it, if comodity prices are so low and labour is so plentiful, why the inflation? Why aren’t Russian businesses popping up everywhere using the cheap comodities and labour to make products and provide services to sell for lower than the current high market prices?

    • Because the powers that KGBe control the banks, and want to make as much of a killing as possible.
      There is no logic to Russian “economics”, except for the bosses win, and the people lose.

    • Don’t they need high interest rates to attract foreign investment? Because they are rated very low/high risk, they have to maintain high rates, otherwise, no one would take the risk.

  8. Stranger_in_a_Strange_Land

    There are no monetary instruments left in Russia. The interest rates are so high that nothing goes anyway. And companies and people are getting killed by foreign currency credits. Lots of “common” people with a little cash stashed away converted that into USD and EUR already last November – remembering 1997.

    I’m not sure that what we see here is really inflation in the sense of overblown money supply. What we see is simply a sharp increase of prices of imported goods (and these are dominating the market, at least in Moscow) due to the devaluation of the Ruble, and the need for many business entities to charge more to be able to serve their foreign credits.

    But wait a little! Let’s see what the Kremlin’s and the courts’ attitude towards defaulting foreign credits will be in a couple of weeks/month. Bet foreigner will have to write off the majority of their billions, as the courts will never put people in jail just because some German bank wants them to. Of course the Russians will kill their access to foreign credits by that, but their child-like high time preference will tell them it’s ok. And they are good in suffering anyway, and have another myth how “The West” killed the Russian economy. Hallelujah!

    And if they really invade Georgia within the next two weeks than it’s SHTF anyway for Russia.

  9. Following up on Stranger, indeed things look pretty bad on the Georgia front.

    Rogozin makes crazy threats mixed with what looks like pre-war preparatory propaganda, read it here:

    http://www.mosnews.com/politics/2009/04/21/chattyrogozin/

    I know it’s not exactly a serious paper, but maybe that’s part of the art. Apparently he was interviewed on Ekho Moskvy, and there are different transcripts floating around. Worth checking, LR ?

  10. Military spending in Russia, thats what is worth checking, at least for me. Even so economy in Russia crumbles, much more money goes on so-called reorganization of army. Making jobs in heavy industry for those who are fired is another part of same problem. Its same steps Hitler did before WWII, same steps Russia is doing right now. Economic problems always led to wars and global economic problems led to global wars.

    I still have very painful memories of tanks with white lines, sign of Warsaw Pact, peace-loving organization prepared to help its socialistic brothers whether they like it or not, rolling through Prague and later of their temporary presence which lasted for more than 20 years. What I fear most is that I see those tanks again. Hopefully, there will be more people to make invaders feel like occupants. Hopefully, our young wont be so scared of fighting as our generation widely was.

    Please excuse my English, we had Russian as compulsory international language in school of our great normalization era..

  11. The Kremlin increased interest rates so high to prevent the banks from borrowing and betting against the Rouble. The Rouble has stabilized and Russia has become an economic train wreck.

    Good going Putin. The KGB are demonstrably good at killing and injuring people, but they have no idea how to run a country.

    Only a few more months left in your term of office.

    Gary Marshall

  12. Having read all the comments, I must say that the majority of them are posted by one and the same person, most probably by the owner of the blog. The wording and the tone is very similar. How long have you been predicting the failure of Russia? Since years? And? Any sucess? No. BTW. The article you posted is a collection of wishful thinking and speculations. The facts are presented in a way misleading the reader. Read IMF or Worldbank or any other economic institution’s report on Russian economy and not this staff put together by a person suffering from the highest possible russophobie. And before you recommend me to put a vodka bottle down, except my recommendation, take a picture of Ms Sharapova and go beat your meat. Afterwards, having asked the pictue: “Was I good?”, you can start to dream of Russia again.

    • Now Vlad, don’t describe your love life in such lurid detail please.
      Though at least you don’t like little boys like your President & PM.
      The IMF has described Russia as a disaster waiting to happen.

  13. Андрюха! Чо зассал то? Почему ответы не пропускаешь? Правда глазки пропитые колет?

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