A question of orientation
- By Li Ziguo
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E-mail Beijing Review, March 31, 2016
Russia is currently stuck in an economic quagmire under the dual pressures of Western sanctions and the endurance of low oil prices. The country has suffered losses of over $500 billion since 2014, according to a report released by a team of Russian economists in February. Most analysts predict such stagnation is likely to continue for quite some time.
Though Russian President Vladimir Putin's approval ratings still hover around 80 percent, Russians are nonetheless worried about the country's economy. A poll conducted in February shows that more than half of the respondents were dissatisfied with the domestic economic performance.
How to overcome these troubles and modernize - or transition from - the traditional industries that have historically propped up the economy has thus become a major task for the nation's policymakers. Moreover, which direction Russia will look to for economic coordination and partnership remains a key question. With its troop withdrawal from Syria that began on March 15, will Russia redirect its efforts on restoring relations with Europe; or will efforts to expand economic cooperation with China and other developing countries continue even after Western sanctions are lifted?
Severe economic loss
Statistics from the Russian Federal Statistics Service show the Russian economy in 2015 was worth about 80.4 trillion rubles ($1.1 trillion), a 3.7-percent decrease from the previous year. Other figures are even more shocking: Foreign trade decreased by almost a third and the total trade surplus was $145.6 billion, a 23.2-percent decrease year on year.
Meanwhile, the Russian currency, the ruble, suffered a depreciation of 24 percent against the U.S. dollar, with the exchange rate fell to a record low of 80 ruble per dollar on January 20 this year.
Today, Russia's financial deficit stands at about 1.95 trillion rubles ($26 billion), which accounts for 2.6 percent of its GDP. Residents' real incomes fell for the second year in a row by 4 percent, with 20.3 million people now living below the poverty line. The only things to go up were the price of commodities, with the consumer price index (CPI) increasing by 12.9 percent, and food prices up by 14 percent.
Unfortunately, the overall 2016 outlook was just as gloomy. The World Bank forecast that Russia's economic strength will continue to fall 0.7 percent this year. According to Russian Economic Development Until 2030, a report issued by the nation's own Finance Ministry, Russia could possibly endure a 15-year-long stagnation period.
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