Monday, February 25, 2019

‘Unorganized’ Change at the Top in Russia a Small but Real Risk to Country’s Economy, Moody’s Says

Paul Goble

            Staunton, February 25 – In a new survey of risks facing the Russian economy, Moody’s Investors Service says that “unorganized” regime change is “a distant but tangible one,” simultaneously sending warnings to both Vladimir Putin and to any who might seek to push him out of office before 2024.

            Many commentators have taken this to mean that the rating agency is close to predicting a revolution, but in fact, a fairer reading seems to be that Moody’s is viewing the situation solely from point of view of markets which do not like change and thus is warning both Putin and his opponents against any sharp turns (

                Polls show, the agency says, that most Russian continue to support Putin personally but their approval does not extend to his policies or his government.  And last fall’s gubernatorial elections show that even Putin’s allies cannot expect to have an easy time of it when they are forced to face the voters.

                The Moody’s report summarizes analyst predictions about risks to the Russian economy in the medium term of which “unorganized” regime or leadership change is only one and far from the most important.  It says that the state’s domination of the economy is a major constraint on economic development and that the regime is doing ever less well in fighting corruption.

            The report also points to the demographic problems Russia now faces because of the declining number of births as the result of secular changes in family size preferences and of the collapse in the number of women in prime child-bearing ages as a result of the radical decline in births in the 1990s after the disintegration of the USSR.

            But it says two things may help compensate for this: the pension reforms which will keep more workers on the job longer and instability elsewhere in the former Soviet space which will in all probability drive more people from these countries to seek jobs and even refuge in the Russian Federation.

            Finally, Moody’s say that two factors represent especially serious risks: expanded sanctions which may make it more difficult for Moscow to sell its state obligations and rising capital flight, the size of which will probably not exceed that in 2014 only because of currency rate fluctuations.

            These economic observations should put the political comments in context: Moody’s is talking about what developments will pose a challenge to the Russian economy not nearly as much as about what developments may happen in the political sphere, unless and until they affect economic performance. 

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