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The decline of the Russian economy: 5 facts

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The decline of the Russian economy: 5 facts

Post by Admin on Sat Aug 15, 2015 3:02 pm

For the first time since 2009 - this was the peak of the recession in the world economy - Russia plunged into recession. This year, the volume of its economy will shrink by 3%, although 360 billion cash reserves to soften the immediate blow of Moscow. However, as Russian President Vladimir Putin does not leave attempts to strengthen Russia's influence in the international arena, it is clear that at the moment it manages "the folding market." If nothing changes, Russia expects a slow and steady economic decline. Below are five facts that explain why this is so. 1. Lack of diversification It is not just the volume of the economy, but also its diversity and sustainability. For years, the Kremlin has supported and defended big state companies to the detriment of small and medium businesses. However, these small and medium-sized businesses are the backbone of any strong and well-diversified economy. They give an impetus to innovate and effectively respond to changing times, technology and consumer tastes. The EU contribution of small and medium-sized businesses in their economies an average of about 40% of GDP, while in Russia the figure is only 15%. It's quite startling figures for those who are going to start a business in Russia. And the situation has not improved: from 2008 to 2012 the number of jobs in the Russian private sector fell by 300,000, while the number of public servants increased by 1.1 million people. Instead of diversifying Moscow doubled down on its state-centric approach to economic development. 2. Dependence on oil markets Today the price of oil fell below $ 45 per barrel - welcome to the new reality. OPEC countries continue to pump huge amounts of oil in an attempt to oust its competitors, and is expected to Iran soon after the lifting of sanctions, will deliver to the world market more than one million barrels per day. This is a very disturbing changes to Moscow whose profits depend on oil and gas sales. In 1999, the share of oil and gas accounted for less than half of Russian export earnings, but today the figure is 68%. Moscow has become so dependent on the sale of energy resources, that at lower oil prices on the Russian one dollar loses about 2 billion. Russia has been able to balance its budget, the price of oil should return to the mark of 100 dollars per barrel. But it will take some time. 3. Impact of Sanctions Over-reliance on Moscow oil sales - revenues from sales make up 40% of the state budget of Russia - made ​​the country particularly vulnerable to international sanctions. Given the age of many of the existing fields in the question of oil from hard shale and deepwater Russia will increasingly depend on new technologies supplied by Western companies. The share of these fields may account for more than 15% of undiscovered oil and 30% of gas reserves. According to some experts, Russia may seek the assistance of China, but while China is increasingly in need of Russian oil and gas, he still does not have the technology that would extract these resources from the earth. According to analysts of the Navy, the international sanctions could cost Russia in 9% of its GDP. 4. Other issues Russia Russian labor productivity is extremely low. For each hour worked an average Russian worker brings Russia's GDP 25.90 dollars. For comparison, the average Greek worker brings its economy 36.20 dollars per hour. But Greece can not be considered a country, which should be equal in terms of performance. What is the average American workers? 67.40 dollars. In addition, widespread corruption costs the Russian economy in the 300-500 billion dollars a year - about as much Greece has received from international organizations in financial assistance. This year, the organization Freedom House has assessed the level of corruption in Russia is 6.75, while the rating of "7" corresponds to "very corrupt." So it should be no surprise that well-educated Russians are leaving the country en masse. From 2012 to 2013, in search of better economic prospects of Russia left more than 300 thousand people, and according to experts, this figure has increased significantly after the annexation of the Crimea in the last year. 5. Lack of desire for change is possible, the main problem of Russia - it is negative. Normally, serious problems in the economy lead to a change in political leadership. In some countries, such as Greece, the situation comes to the extremes: five years in Athens had five governments. But the Russians went the other way: on the background of the economic downturn Putin's popularity began to grow, and today his popularity rating is 86%. It is surprising that, although 73% of Russians are dissatisfied with the state of the economy of their country, seven out of ten approve of how Putin manages it. So is it possible? About 90% of Russians get their news from the Russian TV channels, which are directly controlled by the Kremlin. Placing international sanctions and the invasion of the Ukraine in the context of confrontation between Russia and the West, Putin has managed to ignite nationalist sentiment at home. Today, 63% of Russians are very favorably about their country - for comparison in 2013 there were 29%, and in 2014 - 51%. In such circumstances, it is easier to blame all the economic ills by external forces. Putin knows that his people want to hear. Only it is not clear whether he knows how to save the flagging economy of Russia.

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