Russia’s battered economy: Hardly tottering by | The Economist

Russia’s battered economy: Hardly tottering by | The Economist:



"JUDGING by the lack of economic news in Russia’s media, a crisis has arrived. Just as in Soviet days, state television does not report facts, it conceals them. The official picture is dominated by the war in Ukraine (fuelled by America), Ukraine’s economic collapse (ignored by America) and Russia’s achievements in sport, ballet and other spheres (envied by America). But whereas television does not mention the economy, ordinary Russians have been busily changing roubles into dollars, buying anything that has not gone up in price and making contingency plans.



In the first two weeks of the year, when Russia was on holiday, the rouble fell by 17.5% against the dollar. Inflation is up into double figures. The price of oil, Russia’s main export, has slid below $50 a barrel, prompting economists to revise their forecasts down. GDP is now expected to contract by between 3% and 5% this year. Russia’s credit rating is moving inexorably towards junk.



The government’s Zen-like calm betrays a lack of strategy. Russia’s president, Vladimir Putin, is shown on television receiving positive reports from regional governors. Yet the fall in oil prices to below $50 a barrel will cost the state budget, which was calculated on the basis of $100 a barrel, 3 trillion roubles ($45 billion), or 20% of planned revenues, according to Anton Siluanov, the finance minister. He was already planning to lop 10% off the budget, but may now have to cut further. Even if pensions and salaries are raised by 5%, double-digit inflation means that real incomes will decline for the first time since Mr Putin came to power in 2000."



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