for russias economy the worst is yet to come
Last Updated : GMT 09:03:45
Arab Today, arab today
Arab Today, arab today

For Russia's economy, the worst is yet to come

Arab Today, arab today

Arab Today, arab today For Russia's economy, the worst is yet to come

A mall in central Moscow
Moscow - AFP

Deep recession, skyrocketing prices and a fragile banking system: although the ruble seems to have stabilised after its abysmal drop this past week, Russia still faces the heavy consequences of the turbulence.
For most Russians, the week ended with relief: after trading at unbelievable levels of 80 to the dollar and 100 to the euro, the ruble appears to have stabilised at around 60 and 73, respectively.
A double whammy of Western sanctions over Ukraine and plunging oil prices finally caught up with the country that depends on energy exports for half of government revenue, and the authorities came out of their apparent stupor only as the ruble's plunge in value had already gained momentum.
After the ruble fell by nearly 10 percent on Monday, the central bank moved beyond its limited currency market interventions and in the middle of the night hiked the key interest rate by a tremendous 6.5 percentage points to 17 percent.
But that failed to stop the panic, with the ruble dropping by 20 percent on Tuesday -- bank websites crashed as too many users tried to connect, and crowds packed Ikea until 2 am to get a hold of goods before announced price increases took effect.
- 'Confidence shaken' -
President Vladimir Putin tried to put a brave face on the crisis at his annual year-end press conference, saying that recovery is "inevitable", although he acknowledged it could take up to two years to materialise.
He did not announce any economic reforms or specific solutions to the crisis.
"The trend of the economy in the next six months is certainly going to be much worse" after this past week, said Chris Weafer, an analyst with Macro Advisory consultancy.
"Confidence is shaken -- in the central bank, in the currency, in the direction of the economy," he told AFP.
"Consumption and investment are going to take a hit because of higher (interest) rates, inflation will be higher because of the weaker currency... the banks are going to turn to the government and shelves will be empty after the New Year."
In a sign of the challenges ahead, several suppliers have halted deliveries in a bid to raise prices.
Some stores decided to close their shutters -- Apple stopped sales via its Russian online store, while Ikea suspended sales of kitchens and home appliances and warned that prices on the website "may differ from prices in stores".
Opel and Chevrolet are no longer delivering to dealerships.
Russian media said that stores selling imported alcohol or clothing including Zara, Topshop and Calvin Klein are also trying to avoid selling at a loss while observers predict that many Western brands will soon disappear from Russia.
That trend has begun and inflation -- already close to ten percent -- threatens to reach 15 percent in the coming months.
This will hit the purchasing power of Russians, whose real incomes already declined in the first 11 months of the year compared with 2013.
With the ruble having now lost nearly 50 percent of its value against the dollar in the past year imported food and consumer goods are quickly becoming luxuries.
Even the central bank estimates the economy could suffer a sharp contraction of nearly 5 percent next year if oil prices stay at current levels.
- 'Crisis spreading' -
"Events have moved quickly and there are now growing signs that the currency crisis is spreading to the banking sector," wrote emerging markets economist at Capital Economics William Jackson.
Russia's financial sector is particularly vulnerable, as its state-controlled banking behemoths and a multitude of smaller institutions have been unable to raise funds in the West due to sanctions over Russia's annexing Crimea and support for separatists in Ukraine.
The central bank announced measures Tuesday aimed at ensuring their survival by improving access to liquidity and easing accounting standards.
On Friday, Russian lawmakers approved a bill on the recapitalisation of banks worth one trillion rubles ($16 billion, 13 billion euros). The finance ministry is also hoping to increase capital in the banking sector by 13 percent and the volume of loans issued by 15 percent.
For many Russians, the downward spiral of the ruble brought back memories of the crisis in 1998, when Russia defaulted on its debt.
"People are behaving like it's 1998 but there is no reason for it: Russia was a bankrupt country then and now it's actually financially in a pretty good shape," Weafer said.
High oil prices over the past decade have allowed Moscow to pile up substantial hard currency reserves. Even after having spent heavily to support the ruble, the central bank's reserves still stand at around $400 billion.
Public debt is just over 10 percent of GDP. The budget remains balanced and the government has a big rainy day fund to draw upon to sustain social spending.

 

arabstoday
arabstoday

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

for russias economy the worst is yet to come for russias economy the worst is yet to come

 



Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

for russias economy the worst is yet to come for russias economy the worst is yet to come

 



Arab Today, arab today
Arab Today, arab today Jordanian woman reveals her project

GMT 00:46 2017 Saturday ,11 November

Jordanian woman reveals her project
Arab Today, arab today Visit Jamaica for more than just sun

GMT 09:45 2017 Tuesday ,21 November

Visit Jamaica for more than just sun
Arab Today, arab today Keep kids busy at Thanksgiving gatherings

GMT 11:14 2017 Friday ,10 November

Keep kids busy at Thanksgiving gatherings
Arab Today, arab today UN warns of conflict in Gaza

GMT 08:39 2017 Tuesday ,21 November

UN warns of conflict in Gaza
Arab Today, arab today Missouri problem mirrors woes

GMT 06:46 2017 Tuesday ,21 November

Missouri problem mirrors woes
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Australian academic's book pulled

GMT 15:20 2017 Monday ,13 November

Australian academic's book pulled
Arab Today, arab today May under Brexit pressure at EU reform summit

GMT 02:14 2017 Saturday ,18 November

May under Brexit pressure at EU reform summit
Arab Today, arab today Delhi half-marathon to go ahead

GMT 03:51 2017 Saturday ,18 November

Delhi half-marathon to go ahead
Arab Today, arab today The history of solar eclipses

GMT 05:16 2017 Sunday ,20 August

The history of solar eclipses
Arab Today, arab today VW says will invest over 34bn euros

GMT 07:19 2017 Tuesday ,21 November

VW says will invest over 34bn euros
Arab Today, arab today Driverless, electric future just round

GMT 02:45 2017 Monday ,20 November

Driverless, electric future just round
Arab Today, arab today Singer Jahda Wahba has unlimited ambitions

GMT 07:56 2017 Monday ,20 November

Singer Jahda Wahba has unlimited ambitions
Arab Today, arab today paObama climate envoy slams Trump's rejection

GMT 16:04 2017 Friday ,17 November

paObama climate envoy slams Trump's rejection

GMT 09:23 2017 Saturday ,18 November

Fedra happy for “Between Two Worlds” success

GMT 11:15 2017 Thursday ,16 November

Angola oil boss sacked by father's protege

GMT 18:41 2017 Friday ,20 October

Designer Aql Faqih aspires to innovation

GMT 11:38 2017 Wednesday ,15 November

Unloved vultures fight for their survival

GMT 11:49 2017 Thursday ,17 August

Egyptian artist presents new collection of designs

GMT 00:54 2017 Monday ,20 November

Mideast in danger as London explores

GMT 03:12 2017 Saturday ,18 November

Prince's vision spurs new Cornwall village

GMT 17:12 2017 Monday ,07 August

Al-Shawaifi reveals secrets of total solar eclipse

GMT 16:53 2017 Tuesday ,05 September

Youssra depended on colored foam
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday