Paul Goble
Staunton,
January 3 – The Russian government had remarkable success in raising money over
the last year, but both the ways that it did so and its inability to put in
place the kind of growth it promised mean that it would be taking enormous
risks if it were to follow the same policy in 2019, according to Rosbalt
commentator Sergey Shelin.
Final
budget figures have not been published, Shelin says, but it is already clear that
the government’s current account surplus will amount to several trillion rubles
because of Moscow’s success in extracting money from all the sources at its
command and thus “radically exceed” all the surpluses since 2008 (rosbalt.ru/blogs/2019/01/03/1755055.html).
Oil and gas sales have brought in
more than anyone expected, and the Russian government has had remarkable
success in bringing the shadow economy into the taxable range and in increasing
taxes on the population while reducing spending on the people and even on the
siloviki.
Countries which have this experience
in general see their international standing rise, their national currency strengthen,
and their business climate improve. “But not with us. And here is why.” And it
is this: the regime’s behavior caused “a sharp reduction of financial economic
trust in the country” both abroad and domestically, Shelin says.
New sanctions make growth
problematic, as does the tripling of capital flight from the country compared
to 2017. The finance ministry has managed to reduce the ruble’s dependency on the
price of oil, but it has not been able to do the same with regard to
sanctions. As a result, the ruble has
fallen 20 percent against the dollar and the euro in the past year.
This devaluation has led to an
accelerated growth in consumer prices, even as incomes continue to fall. There was the beginning of a bank panic but
higher interest rates appear to have blocked it for now. And the result of all these things has been
economic stagnation of such an extent that all efforts to boost production have
failed.
The government has no idea how to
cope because its economic program is based on organizing an investment boom,
something it cannot hope to achieve without changing other policies, and because
it is not prepared to change any of them because it views modifications and concessions
domestically and internationally as “unacceptable.”
There has been some modest
growth in some sectors, but none at all in others, Shelin continues. The standard of living of the population is
declining so there is no possibility of a consumer-driven revival, and the
oligarchs are prepared to lead it only with government-supplied funds. Thus,
the most optimistic projections are that 2019 won’t be much worse than 2018.But that is the most optimistic, the commentator says; and there are good reasons to think the situation will be worse especially if the government tries to continue exactly the same policies it has been using the past 12 months.
Oil prices are unlikely to rise, although Moscow has enough reserves to weather even a serious decline. “In normal circumstances then, this would not be critical.” But “much more serious misfortunes will occur if there are sanctions on the banking system” and if the regime continues to squeeze population, taking more and giving back less.
Instead, things are likely to get worse across the board. And that is all the more so because “there are today no obvious reasons on view by which trust will be able to grow.” More likely, it will continue to fall. And that will make any step in the future like those the regime has taken already both more difficult and more politically dangerous.
Indeed, Shelin concludes, “to continue into 2019 the economic course which exhausted itself already in 2018 is a quite risky proposition.” The Russian powers that be think that they can do what they have once again because they did it once before, but while it is possible they may be right, it is equally or even more likely that they are not.
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