Russia’s Ministry of Economic Development will release second quarter data on GDP growth today. Preliminary data shows that Russia’s economy
Russia’s Ministry of Economic Development will release second quarter data on GDP growth today.
Preliminary data shows that Russia’s economy expanded by 0.9% year-on-year in Q2, improving on a two-year low of 0.5% in the previous period.
Despite the uptick, the government has expressed concerns for the immediate future. The Russian economy ministry revised a set of key economic forecasts last Monday, lowering growth and inflation projections for 2020—from 2.0% growth to 1.7% and from a 3.0% inflation rate to 3.8%. Likewise, Russian President Vladimir Putin has raised concerns, describing Russia’s growth as “insufficient”.
In addition to sharing worldwide fears over the US-China trade war and the fate of Brexit, Moscow continues to bear the additional brunt of Western sanctions and low energy prices. Russia has responded by undergoing a significant macroeconomic shift by bolstering its foreign currency reserves, reducing its foreign debt, and reducing its holdings of US Treasury bonds. By doing so, Moscow aims to reduce its exposure to the United States-centric global economic system and create a large enough financial cushion to withstand a future global recession.
The efficacy of this long term, systemic shift away from the West will be tested by how Russia fares in such a crisis. Russia’s conservative fiscal and monetary policies may foster some macroeconomic stability in the short to medium-term but have set the stage for longer-term stagnation—effects that will be exasperated by downward pressures like demographic decline and migrant outflows.