Russia’s economy grinding to a halt?

posted at 5:01 pm on April 14, 2013 by Erika Johnsen

In January, Prime Minister Dmitry Medvedev set a goal of 5 percent growth for the Russian economy, one of the central promises of Vladimir Putin’s campaign — but not only is that proving to be too wildly optimistic a target; now they’re scrambling just to avoid recession. No neighboring economy is safe, it seems, from the ravages of the all-destabilizing and never-ending European debt crisis. Says their economic minister:

“We are not in recession for now, but we may get there – there is such a risk,” Mr Belousov told reporters during a trip to eastern Siberia. “I think that, if by autumn we don’t see growth for some period, we may slide into recession.”

The announcement comes a day after his ministry slashed its projection for economic growth in 2013 by a third, from 3.6 per cent to 2.4 per cent. Growth in the first quarter was likely to have reached about 1 per cent, compared with a year ago, which would mark the fifth-consecutive quarter of slower growth. …

The slower first-quarter growth was mainly the result of a combination of low industrial production, consumer spending, and investment, said economy ministry officials.

But of course, let’s not dismiss the fact that Russia has more than their fair share of systemic economic problems to complicate matters:

The government is considering boosting spending on much-needed road, rail and other infrastructure projects, but after several years of sharp spending increases, the budget is already under pressure.

“Russia faces the challenge of increasing the competitiveness of its economy if it wants to increase GDP growth on a sustainable basis to at least 4%,” said Alexander Morozov, chief economist at HSBC Bank in Moscow.

He noted that the challenge “is particularly difficult for Russia, where state-controlled companies dominate the economy and face little competition.” He noted that small and medium enterprises “generate only a small share of GDP and suffer more than large companies from various administrative barriers to their business expansion.”

And while it certainly does benefit the larger global economy, it doesn’t help their situation that their stronghold on the regional natural gas market is getting a little healthy competition from the shale boom going down in the US of A:

Russia’s oil exports could plunge in the coming decades as the U.S. ramps up output of shale oil, a group of government-linked experts said, in an unusually frank admission that the North American energy boom poses a threat to Russia’s hydrocarbon-fueled economy.

Russia, the world’s largest energy producer, is already seeing its natural-gas exports shrink, partly as a result of the U.S. shale-gas boom. Government officials have raised concerns in recent months that dwindling gas exports are holding back economic growth and costing the government billions of dollars in lost revenue.

Russia relies on oil and gas revenues for about half of their federal budget, and while their state-controlled industries have faced very little competition, the reckoning of the global economy is finally starting to catch up with them. All the better reason for us to start LNG-exporting more, no?


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

GTFO….

catmman on April 14, 2013 at 5:07 PM

I hope not. As Vladimir Putin is now the last defender of Traditional Christian Civilization, I hope Russia will remain strong and thrive.

God bless Vladimir Putin- The Last Man Standing.

sartana on April 14, 2013 at 5:07 PM

the second they are nervous, expect an invasion on their borders, Georgia the most likely candidate.

rob verdi on April 14, 2013 at 5:08 PM

Does anyone else get the feeling things have been flying part but our political elites have no grasp.

rob verdi on April 14, 2013 at 5:09 PM

russia is dieing, and putin knows this.

losarkos on April 14, 2013 at 5:09 PM

I have always said we need to become a net EXPORTER of oil & gas….

Break up OPEC and let them eat sand.

Russia will take care of itself.

redguy on April 14, 2013 at 5:10 PM

They still have tanks, and they’re handy with turning off the spigot.

John the Libertarian on April 14, 2013 at 5:12 PM

Maybe if Moscow stopped building all those weapons…

Or maybe Obama can send them a few trillion. It’s not fair that the US be the world’s biggest superpower. Surely, the Left would love Obama more, and make his poll numbers rise.

Liam on April 14, 2013 at 5:12 PM

russia is dieing, and putin knows this.

losarkos on April 14, 2013 at 5:09 PM

Russia’s birthrate is rising, ours is falling.

Jon0815 on April 14, 2013 at 5:17 PM

It is part of Europe’s economy and Europe’s economy is not really going gangbusters…

albill on April 14, 2013 at 5:25 PM

Russia’s birthrate is rising, ours is falling.
Jon0815 on April 14, 2013 at 5:17 PM

“Russian Baby Boom a Temporary Phenomenon”
http://blog.euromonitor.com/2013/02/russian-birth-rate-above-regional-average.html

albill on April 14, 2013 at 5:27 PM

russia is dieing, and putin knows this.

losarkos on April 14, 2013 at 5:09 PM

Russia has a leader, in Vladimir Putin, who realizes that the key to their future stability and prosperity is a healthy and growing Russian people and to that end, Putin has been using his influence to get Russians to re-produce and raise healthy families with a respect for traditional morality.

We here in America are lorded over by a depraved political class which openly despises us and seeks to replace us with easily controllable Third World slaves.

Peregruzka, baby.

sartana on April 14, 2013 at 5:29 PM

…stimulus spending would work!

KOOLAID2 on April 14, 2013 at 5:39 PM

And here we are with near identical proposed growth figures, and yet our guys are saying everything is hunky-dory.

Could this be one area where the Russian government is more truthful than ours?

unclesmrgol on April 14, 2013 at 5:40 PM

I hope not. As Vladimir Putin is now the last defender of Traditional Christian Civilization, I hope Russia will remain strong and thrive.

God bless Vladimir Putin- The Last Man Standing.

sartana on April 14, 2013 at 5:07 PM

Yep, who’da thunk?

slickwillie2001 on April 14, 2013 at 5:42 PM

Vlad, I mean Sartana, don’t you have better things to do than post on HotGas? Aren’t there journalists to be murdered and cronies to be enriched?

I especially loved:

last defender of Traditional Christian Civilization

If that is “Traditional Christian Civilization” give me Gay Marriage and Strip Clubs or give me Islam, any day.

I figured you were being sarcastic, but I don’t think so…

But surprise me; because I am just this tongue-in-cheek myself, sometimes.

JFKY on April 14, 2013 at 5:46 PM

I didn’t know that it had ground to a start.

southsideironworks on April 14, 2013 at 5:48 PM

The government is considering boosting spending on much-needed road, rail and other infrastructure projects

Good Lord, do all commies think alike?

**At least they didn’t call it investment**

Odysseus on April 14, 2013 at 6:05 PM

I have always said we need to become a net EXPORTER of oil & gas….

Break up OPEC and let them eat sand.

Russia will take care of itself.

redguy on April 14, 2013 at 5:10 PM

Agreed on all three points, The last concern I have is Russia’s survival or survivability :). Somehow I suspect that Vladimir will find ways to continue (and succeeding at) blackmailing half of Europe into submission, if not all of it….

jimver on April 14, 2013 at 6:14 PM

It also doesn’t help that Russia has one of the most corrupt and least free economies in the world. But don’t worry, we’re hot on their heels and will catch up before you know it.

RadClown on April 14, 2013 at 6:15 PM

I didn’t know that it had ground to a start.

southsideironworks on April 14, 2013 at 5:48 PM

That was good.

JFKY on April 14, 2013 at 6:16 PM

The government is considering boosting spending on much-needed road, rail and other infrastructure projects

It’s a planetary disease, remember…a very resistant bacteria strain too :)…

jimver on April 14, 2013 at 6:16 PM

What, you mean a Russian Mob-run thugoconomy, like which just imploded in Bulgaria, does not work on a much grander scale?

Shocking …

M240H on April 14, 2013 at 6:21 PM

…why is he wearing a shirt and jacket?

KOOLAID2 on April 14, 2013 at 6:23 PM

OT – are there more stupid people in the world than the US fools who elected these weasels?

Schadenfreude on April 14, 2013 at 6:30 PM

The government is considering boosting spending on much-needed road, rail and other infrastructure projects, but after several years of sharp spending increases, the budget is already under pressure.

Can we send them all of our high-speed rail ‘experts’? Pretty please?

slickwillie2001 on April 14, 2013 at 6:45 PM

Drill, baby, drill. The best revenge is to run them out of business.

Philly on April 14, 2013 at 7:05 PM

More wodka!

profitsbeard on April 14, 2013 at 7:12 PM

…why is he wearing a shirt and jacket?

KOOLAID2 on April 14, 2013 at 6:23 PM

I know, I am used with more bare chest from him :)…shirts must be in again in Russia :)

jimver on April 14, 2013 at 7:14 PM

All the better reason for us to start LNG-exporting more, no?

I am willing to say no.

astonerii on April 14, 2013 at 7:15 PM

I hope not. As Vladimir Putin is now the last defender of Traditional Christian Civilization, I hope Russia will remain strong and thrive.

God bless Vladimir Putin- The Last Man Standing.

sartana on April 14, 2013 at 5:07 PM

You couldn’t be more wrong. They are Germany redux.

WryTrvllr on April 14, 2013 at 7:34 PM

Russia’s birthrate is rising, ours is falling.

Jon0815 on April 14, 2013 at 5:17 PM

Only in 1 segment of their population.

People better get a grip on the magnitude of this…..

WryTrvllr on April 14, 2013 at 7:37 PM

…stimulus spending would work!

KOOLAID2 on April 14, 2013 at 5:39 PM

Don’t know who you are…..but I hope you have tenure at my daughter’s university.

WryTrvllr on April 14, 2013 at 7:39 PM

It’s a planetary disease, remember…a very resistant bacteria strain too :)…

jimver on April 14, 2013 at 6:16 PM

Which is fine. Cause with O’bozo killing off the big pharma in this country, soon ALL the dumb A$$ libs will be dead.

WryTrvllr on April 14, 2013 at 7:42 PM

whoa…..it’s sunny and 65 F outside……..

WryTrvllr on April 14, 2013 at 7:44 PM

I think it is VERY possible that both the Russian and Chinese governments could collapse and break apart…..just like Yugoslavia.

…….and I think the very same thing could happen here. Not tomorrow, not next year, but 5, 10, 20 years from now?

PappyD61 on April 14, 2013 at 7:51 PM

At least Putin is playing for his team, 0bama is not.

jukin3 on April 14, 2013 at 8:12 PM

This kind of Wild West Capitalism rife with mafioso, state corruption and crony Capitalism is the ugly, immoral side of Free Enterprise. I think we’re seeing this more and more, U.S. included.

Russia is a vast country with many, many resources. They aren’t like Kuwait or Saudi Arabia that has only one resource.

Dr. ZhivBlago on April 14, 2013 at 9:21 PM

This kind of Wild West Capitalism rife with mafioso, state corruption and crony Capitalism is the ugly, immoral side of Free Enterprise. I think we’re seeing this more and more, U.S. included.

Russia is a vast country with many, many resources. They aren’t like Kuwait or Saudi Arabia that has only one resource.

Dr. ZhivBlago on April 14, 2013 at 9:21 PM

hahahahahahahahahahahahahahahahahaha

pull this finger….

WryTrvllr on April 14, 2013 at 9:36 PM

Wow. Damn if that wasn’t easy.

You Listen O’bozo????

Didn’t think so.

WryTrvllr on April 14, 2013 at 9:55 PM

Wow! A real issue! Why aren’t we talking gay marriage or that criminal abortionist in Philly?

thuja on April 14, 2013 at 10:33 PM

thuja on April 14, 2013 at 10:33 PM

…GFY!…till you bleed profusely!

KOOLAID2 on April 14, 2013 at 10:39 PM

Now I understand this song, it’s from the Russian bureaucrats.

http://www.youtube.com/watch?v=pXgVL_RG1wM

Rambotito on April 14, 2013 at 11:51 PM

And here we are with near identical proposed growth figures, and yet our guys are saying everything is hunky-dory.

Could this be one area where the Russian government is more truthful than ours?

unclesmrgol on April 14, 2013 at 5:40 PM

I humbly offer a different perspective.

If you spent time over there you would somewhat understand this:

It’s a view ratified by Nikolai Svanidze, a leading anchor on Rossiya, who said in June that viewers were “tired of pluralism.” “Our guests from the United States and European countries may not understand what I’m talking about,” Svanidze said, “but the classic Soviet viewer is not used to alternatives. It’s tiring to have a choice because you have to think.”

Source: http://www.usnews.com/usnews/news/articles/060709/17russia_2.htm

IlikedAUH2O on April 14, 2013 at 11:51 PM

Russia’s birthrate is rising, ours is falling.

Jon0815 on April 14, 2013 at 5:17 PM

We have an unending supply of new Americans.

Si se puede!

/s

trigon on April 15, 2013 at 12:26 AM

But how will Russia fund newer and better ICBM’s to counter the “threat” of the U.S. missile shield which was never designed to tackle the vastness of the Russian arsenal even if each interceptor had 100% kill certainty.

Putin wants Cold War II but will soon find out he can’t afford it just as we can’t.

Yakko77 on April 15, 2013 at 12:58 AM

I think it is VERY possible that both the Russian and Chinese governments could collapse and break apart…..just like Yugoslavia.

…….and I think the very same thing could happen here. Not tomorrow, not next year, but 5, 10, 20 years from now?

PappyD61 on April 14, 2013 at 7:51 PM

You may be on to something. Europe is fragmenting under its sort-of confederacy (Scotland, Catalonia, Flanders are all breaking off from their mother countries), and I don’t think it’s necessarily as bad an outcome as it was in the past. Have smaller, autonomous states confederated under larger ones might benefit the world, by bringing more local control to people, while keeping in place the free trade and unified foreign policies of larger states.

EricW on April 15, 2013 at 8:48 AM

The government is considering boosting spending on much-needed road, rail and other infrastructure projects

Vlad didn’t get the memo that it’s called investment not spending.

He noted that small and medium enterprises “generate only a small share of GDP and suffer more than large companies from various administrative barriers to their business expansion.”

Well, Vlad has that part right. Maybe by the time the Russians ‘elect’ another dear leader, someone will have this economic prosperity thingy figured out.

Kissmygrits on April 15, 2013 at 9:12 AM