The Coming Russian Depression
Even by Russian standards, the economic news last week was exceedingly grim.
A new report released by Standard & Poors revealed that as Russia’s population crashes to near 115 million by 2050, a loss of well over 15% from today’s level, and as it ages while younger workers disappear, the country can expect national debt to soar to stratospheric levels nearly six times what Russia produces in value in a given year. Russia will produce less and less value with fewer and fewer productive workers (Russian workers are already among the world’s least productive and most corrupt), yet it will be called upon to pay out more and more to unproductive, aging workers.
S&P’s conclusion was stark indeed: “By 2035, we expect that Russia’s fiscal indicators will have weakened such that they would be more in line with sovereigns currently rated in the speculative-grade category, because, in our view, the projected improvement in GDP per capita would not be able to offset the potential fiscal deterioration.”
Standard & Poor’s Ratings Services on Monday cut Russia’s foreign-currency sovereign credit ratings for the first time since January 1999, citing capital outflows and the rapid decline of the country’s international reserves. S&P lowered Russia’s ratings to BBB/A-3 from BBB+/A-2 (just two notches above junk status) and assigned them a negative outlook, indicating the likelihood of another ratings downgrade. Reserves are down 22% since August and the stock market is down 75% since May. Russia is projected to run a 3% deficit in 2009.
Ford Motor Company is shutting down its Russian production plant for one month due to lack of demand resulting from Russia’s financial crisis.
The massive Shtokman national gas project is now on hold, for the same reason.
The Kremlin’s response? It is outlawing the use of the term “crisis” in publishing, because in neo-Soviet Russia, no such thing is possible. Oh and, of course, because there is no crisis and it has plenty of extra cash, it is launching a massive new arms race. Meanwhile, it wants everyone to know that the real cause of any “difficulties” Russia may be having is foreigners, particularly dark-skinned migrant workers, and it’s getting ready to expel them all.