Russia Running Out Of Money

My Comments: Global media is full of woe and gloom about the near term economic future of the US and the rest of the planet. This has the potential to add to that gloomy forecast.

I have strong memories of the Cold War and the threat posed by the Soviet Union. While the Soviet Union no longer exists, it’s remnants, principally Russia, appear to be a hollow shell of what existed 40 years ago. It helps us understand why Putin and Russia are trying to appear strong and decisive about Syria and their relationship with Turkey.

But the steam is about to be exhausted. The danger is that their last gasp might engage us in yet another ground war we cannot win. I’d rather see a healthy Russia with enough sense and democracy to engage productively with the rest of the world. Fat chance.

Ben Moshinsky on Dec. 8, 2015

Russia’s economic prognosis is dire.
Here’s a map of how Russia’s been doing on a global level from HSBC:

Alexei Kudrin, who was Russia’s finance minister from 2000 to 2011, said, that within the next few years, Russia’s “reserve funds will be exhausted and they will have to raise taxes.”

And here’s its inflation rate compared with other economies:

Kudrin was speaking in London on Tuesday at a Moscow Exchange conference.

He said one of the big problems Russia faces is servicing its social security payments, particularly pensions.

Kudrin said Russia would have to find a way to cut pension payments and devolve budget powers to the regions.

He also said Russia should boost infrastructure investment by using funds earmarked for military and defence spending.

But with an election coming up in a few years and geopolitical risks increasing with airstrikes over Syria and tensions with Turkey, these types of reforms would be unlikely to happen soon.

“The main thing is we should change the economic structure,” said Kudrin. “What we’re seeing is that the current growth potential is quite low.”
This is an understatement.

Russia has been home one of the worst performing major world economies this year. It’s been squeezed by sanctions on government-controlled companies (of which there are about 1500) and an oil price crash.

It’s got both high inflation, at about 15%, and double-digit interest rates, making private financing for business difficult.

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