Is Another Economic Crisis in Russia’s Future?

This Thursday global leaders are meeting in St. Petersburg, Russia for the G20 summit to discuss the future of international economies.

Due to political tension many world leaders made statements indicating that the summit would only focus on economic concerns.

As many of the BRICS economies have begun to slow down they are all under intense scrutiny and will be a heavily discussed topic at the summit.

India is currently in the spotlight as their currency has lost one fifth of its overall worth. 67 rupees are now equivalent to 1 US dollar, a lifetime low, and there are fears that it will only continue to sink lower.

Also making headlines, Brazil’s real has reached a 5 year low. This, in addition to high costs of living, have been the cause of nationwide protests and civil unrest throughout Brazil.

US talks of ending Quantitative Easing has the BRICS nations worried about how the lack of fiscal stimulus will affect them.

Downward Spiral

In Russia, unemployment is still on the rise and GDP has had the slowest growth since 2009. Contrary to President Vladimir Putin’s promises, foreign investments into the nation has not increased.

The central bank of Russia interest rates are still quite high and it is because of this that investors cannot take out loans and make any form of investment into the economy.

The rates will only be reduced if the GDP falls within the 4%-5% corridor which is unlikely at this time. Current investment into the nation’s industries are estimated to be 3.7% and only a 0.1% rise is predicted for the year.

This feeble growth in addition to the perpetually increasing inflation is causing widespread public concern.

Additionally, Russia is still heavily reliant on exporting their natural resources. Currently, the price of oil is on a gradual decline and this is causing a further strain on the nation’s economy.

It has been reported that if China’s GDP falls to just 3% from its current 7.4% that a global economic crisis can occur. Considering that China is a major buyer of Russia’s natural resources, if this happened will Russia be able to survive?

This situation is not impossible as the interest for metal declines, one of China’s primary sources of income will be compromised thereby lowering the nations GDP.

With all the internal and external factors at play, it is possible that Russia will soon suffer the same fate as their Indian counterparts.

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