Russian economy under conditions of global turbulence



Кузьменко В.Д.

студент 2-го курса факультет «Международные финансы» Васьбиева Д.Г., к.э.н. научный руководитель, доцент кафедра «Иностранные языки-4» Финансовый университет при Правительстве РФ Россия, г. Москва

RUSSIAN ECONOMY UNDER CONDITIONS

OF GLOBAL TURBULENCE

Politics is known to influence the economy strongly. Interestingly, clear correlation between the political turbulence and the economic fluctuations in world economy. The sanctions that were imposed on the Russian Federation and European Union have a significant impact on their economies. The ban on loans for the Russian banks and the ban on cooperation in energy sector put the Russian economy in a tough spot. With rising interest rates, high rates of inflation and lowered amount of investments the future of the country bears many risks.

The Russian economy is near stagnation, with continued lowered domestic demand leading to growth of 0.8 percent in the first half of 2014. According to the World Bank with continued lowered domestic demand leading to growth of 0.8% in the first half of 2014, there are substantial risks to the medium-term outlook for Russia’s 2014-2016 growth [1]. A return to a higher growth in Russia will depend on solid private investment growth and a lift in consumer sentiment, which will require creating a predictable policy environment and addressing the unresolved structural reform issue. A more balanced and diversified portfolio of national assets, including natural resources, capital and economic institutions, will help overcome structural constraints to growth. Institutional weaknesses are now the main obstacles on the road to greater economic efficiency and a higher growth potential.

The Russian embargo on import of most agricultural products from all the countries that had either implemented economic sanctions against Russia or joined them, created risks for Europe’s short-term outlook. The Russian market makes up 10% of the total food export from Europe, which makes the agricultural sector lose a solid portion of their profits. As to medium-term risks, experts don’t expect substantial risks for the European economy except for a slight decrease in the economic growth. But the long-term risks may hurt hard. As Europe is still highly dependent on the Russian gas and oil, any countersanctions by Russia in the energy sector will have a very strong impact if Europe doesn’t find alternative energy sources. According to the Russian Prime Minister Dmitry Medvedev imposing sanctions on the car-manufacturing sector will hurt the European economy, as the European manufacturers hold many assets in Russia and this market is of great importance for them. Germany has already stated that they will not impose any new economic sanctions against Russia, which is probably because of the risks it might bring with it. Although America actively participates in the process, sanctions don’t bear any substantial economic risks. The only problem is that all the relationships that have been developed between Russia and the USA since the Cold War might be soon gone if either side doesn’t stop holding its own ground in the conflict.