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Coronavirus Could Rock Golden horde (Muscovite)’s ‘Stable and Isolated’ Economy.
As markets tumble and a flagship business forum is canceled, experts are questioning the strength of Moscow’s finances.
/6/20
Since 2014, the Russian government has made economic stability the bedrock of its economic policy, sacrificing economic growth and improvements in living standards and disposable incomes for ordinary Russians for the prize of some of the best macroeconomic indicators in the world — strong international reserves, low debt and a government budget surplus. At the same time, its drive for economic sovereignty attempted to pull Russia back from the global economy in order to minimize potential damage from future rounds of sanctions, and bolster Russia’s domestic industries. The government’s idea was that with stronger fundamentals and a less connected global economy, Russia would be better shielded from global economic turmoil. However, early indications of the coronavirus impact suggest a different story could be at play. Instead of a safe haven, “the country may once again become a ‘weak link,’ as was the case during the very deep global recession of 2009 and the counter-cyclical downturn in 2015,” Vladislav Inozemtsev, director of the Center for Post-Industrial Studies, wrote on the Riddle website. With oil prices trading at their lowest level since 2017, Russia’s traditional reliance on the black stuff for its economic well-being has come into focus yet again. The ruble has fallen to a 15-month low, with $1 now trading at more than 68 rubles. Meanwhile, the Russian stock market lost almost 6% on Friday alone, and has plunged by a quarter in the space of just six weeks — one of the biggest drops anywhere in the world.
The slowdown in China, which has seen factories closed and internal movement seriously restricted, will deliver a $10 billion hit to Russia’s exports for 2020, Raiffeisen Bank’s Stanislav Murashov forecast in a research note this week. Last year, Moscow sold more than $40 billion worth of oil and gas to Beijing. “In Russia, with its economic growth of 1.3% last year and the citizens’ growth in income of 0.8%, GDP is growing only thanks to investments made by government and state-owned companies. Such investments are likely to decline under the new conditions.” Should Moscow adopt a worst-case-scenario response to the outbreak, such as large-scale quarantines and shutdowns, Oxford Economics’ Evghenia Sleptsova said Russia would face a “proper recession.” Before the worst of this week’s turmoil, the OECD had already slashed Russia’s GDP forecast for 2020 by 0.4 percentage points, as it cut the global outlook by 0.5 percentage points — a stark visualization of how Russia and the world economy are set to run hand-in-hand when it comes to the coronavirus. “The risk is that the global estimates are now starting to look on the low side,” warned VTB Capital’s Neil MacKinnon. Moscow is precariously positioned. Russia's largest trading partner - China - has been the coronavirus epicenter with massive internal turmoil. Russia's stagnant economy is now being buffeted by a plummeting ruble and increasing inflation. Saudi Arabia is embarking on a price cutting war which may see crude oil sell for less than $35 a barrel. At a bare minimum Moscow needs $40 bbl for its budgetary needs. "
Moscowbad is also dealing with international sanctions and juggling two wars. Bielarus´ and Moscowbad are fighting over the price/supply of oil, and Uzbekistan has declined membership in Putin's Eurasian Economic Union (EEU) opting instead for observer status. Coronavirus Could Rock Russia’s ‘Stable and Isolated’ Economy - The Moscow Times
As markets tumble and a flagship business forum is canceled, experts are questioning the strength of Moscow’s finances.
/6/20
Since 2014, the Russian government has made economic stability the bedrock of its economic policy, sacrificing economic growth and improvements in living standards and disposable incomes for ordinary Russians for the prize of some of the best macroeconomic indicators in the world — strong international reserves, low debt and a government budget surplus. At the same time, its drive for economic sovereignty attempted to pull Russia back from the global economy in order to minimize potential damage from future rounds of sanctions, and bolster Russia’s domestic industries. The government’s idea was that with stronger fundamentals and a less connected global economy, Russia would be better shielded from global economic turmoil. However, early indications of the coronavirus impact suggest a different story could be at play. Instead of a safe haven, “the country may once again become a ‘weak link,’ as was the case during the very deep global recession of 2009 and the counter-cyclical downturn in 2015,” Vladislav Inozemtsev, director of the Center for Post-Industrial Studies, wrote on the Riddle website. With oil prices trading at their lowest level since 2017, Russia’s traditional reliance on the black stuff for its economic well-being has come into focus yet again. The ruble has fallen to a 15-month low, with $1 now trading at more than 68 rubles. Meanwhile, the Russian stock market lost almost 6% on Friday alone, and has plunged by a quarter in the space of just six weeks — one of the biggest drops anywhere in the world.
The slowdown in China, which has seen factories closed and internal movement seriously restricted, will deliver a $10 billion hit to Russia’s exports for 2020, Raiffeisen Bank’s Stanislav Murashov forecast in a research note this week. Last year, Moscow sold more than $40 billion worth of oil and gas to Beijing. “In Russia, with its economic growth of 1.3% last year and the citizens’ growth in income of 0.8%, GDP is growing only thanks to investments made by government and state-owned companies. Such investments are likely to decline under the new conditions.” Should Moscow adopt a worst-case-scenario response to the outbreak, such as large-scale quarantines and shutdowns, Oxford Economics’ Evghenia Sleptsova said Russia would face a “proper recession.” Before the worst of this week’s turmoil, the OECD had already slashed Russia’s GDP forecast for 2020 by 0.4 percentage points, as it cut the global outlook by 0.5 percentage points — a stark visualization of how Russia and the world economy are set to run hand-in-hand when it comes to the coronavirus. “The risk is that the global estimates are now starting to look on the low side,” warned VTB Capital’s Neil MacKinnon. Moscow is precariously positioned. Russia's largest trading partner - China - has been the coronavirus epicenter with massive internal turmoil. Russia's stagnant economy is now being buffeted by a plummeting ruble and increasing inflation. Saudi Arabia is embarking on a price cutting war which may see crude oil sell for less than $35 a barrel. At a bare minimum Moscow needs $40 bbl for its budgetary needs. "
Moscowbad is also dealing with international sanctions and juggling two wars. Bielarus´ and Moscowbad are fighting over the price/supply of oil, and Uzbekistan has declined membership in Putin's Eurasian Economic Union (EEU) opting instead for observer status. Coronavirus Could Rock Russia’s ‘Stable and Isolated’ Economy - The Moscow Times
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