Staunton, May 16 – Ever more Russians are talking about the restoration of normality after the eventual end of the coronavirus pandemic, but the real crisis Russia faces will continue long after that date and may even intensify and grow, according to Academician Abel Aganbegyan.
Speaking to an online meeting of the Moscow Academic Economic Forum on “The Post-Pandemic World and Russia: A New Reality?” the senior scholar says that there are three causes for the looming crisis: pandemic limitations, the collapse of oil prices and “the seven-year-long stagnation of the Russian economy” (krizis-kopilka.ru/archives/76372).
As a result, the GDP of Russia will fall eight percent this year, real disposable incomes of Russians will fall eight to ten percent, and “the federal budget will contract by one and a half times.” The number of poor will increase to at least 30 million and perhaps more and the number of small and mid-sized firms will contract by one and a half time via bankruptcy.
“This crisis from my point of view will be, at least in the social level, much deeper than the crisis of 2009,” although up to now the government has not been addressing it sufficiently seriously, he says. Russia got out of the 2009 crisis in about a year, but it did so only because it spent 10.9 percent of GDP (12 trillion rubles or 500 billion US dollars) to do so.
Now faced with a much worse crisis, the Russian government so far has spent only a little more than two trillion rubles (30 billion US dollars), an amount that suggests the Kremlin will spent only four percent of GDP ultimately and not the 15 to 20 percent of GDP that other major countries are doing.
Moscow should be spending 10 to 15 trillion rubles (160 billion to 250 billion US dollars) both directly and via credits if it is to have any chance to escape a deep and prolonged recession. But it isn’t even doing what it could via the Central Bank to stimulate economic growth and protect companies.
It would be well, Academician Aganbegyan says, if the Putin regime were to view this crisis as an opportunity to get out of the stagnation it has presided over in recent years. Massive public investment in infrastructure and human capital could allow it to do so. But so far, there has been little indication that the Kremlin is disposed to do what is needed.
And Russia will as a result find itself even further behind other countries like the United States which is spending far more to address the crisis and to create serious conditions for recovery.