Phase Two: Russia's economic problems move from acute to chronic

Phase Two: Russia's economic problems move from acute to chronic

Russia's economy suffered heavily in 2015 and it seems to be getting worse. The decline of oil prices hurt Russia's exports and government revenues. Russia's GDP fell by nearly 4% and inflation was right around 13%. The currencies' value, which already dropped by half in 2014, dropped another 20%. The article suggests Putin may be tempted to print roubles if the government would happen to run out of ready cash, but this would only raise inflation higher and speed up the roubles decline. This would also lower the purchasing powers for Russian firms and families.

Consumer spending is declining at a steady rate and retail purchases are down more roughly 13%. Foreign travel has also dipped by 30% from the previous year. It seems that Russia is facing "a decline in quality in life" according to Natalia Zubarevich of the Independent Institute for Social Policy. Real Wages in Russia fell by 4% in 2014 and fell again in 2015 by 9%, which happened to be the first dip under Vladimir Putin. Finally, the article points out that to a foreign buyer, labour is now cheaper in Russia then in China even though foreign investment in Russia is also falling. Vladimir Putin believes the first phase of the economic crisis is over and that the second phase will be better.