Economic Collapse in Putin’s Russia
The lastest jaw-dropping bad news out of Russia came last week with the announcement that the beleaguered nation’s economy shrank a stunning 10.9% in the second quarter of this year, a significant increase from the 9.8% contraction that occurred in the first quarter, meaning that the pace of Russia’s devastating recession accelerated rather than slowing at the whopping rate of over 10% per quarter). It was the worst quarterly performance of the Russian economy since the fall of the USSR. The data was much worse than economists had predicted, and the ruble and stock markets plunged accordingly. With only half the year over, economists are predicting a double-digit budget deficit, 10% of GDP or more, by the end of the year, with worse to follow in 2010, including the total exhaustion of the budgetary emergency fund.
Bloomberg reported: “By the end of 2009, 17.4 percent of the population, or 24.6 million people, will be living beneath the subsistence level of $185 per month, almost 5 percent more than before the crisis, the World Bank said in a report released in June. Rising numbers of jobless and falling wages will cut the country’s nascent middle class by 10 percent, or 6.2 million people, to about 51.2 percent of the population. Household consumption, the main source of growth in recent years, is collapsing, it added.”
The Russian economy is in freefall, and there is no telling where or when it will hit bottom. Even many highly placed Russians are now admitting this openly. Paul Goble reports that Garegin Tosunyan, President of the Association of Russian Banks, has declared that the economy is “chronically ill” because of “monetary and credit policy which had not been thought through” by the Kremlin. If someone Putin can throw in jail is saying that, do you dare imagine how bad things really are?
Indeed, how could Russia’s economic policy have been “thought out ” at all? Russia is ruled by a proud KGB spy with no economics training or business experience of any kind, and he has surrounded himself with sycophants of the same ilk. It is a hopeless situation from which only regime change can save Russia. Yet there is virtually no chance that the benighted people of Russia will realize that fact before it is far too late.