Russian leaders are warning against the possibility of continued decline of the economy.
The World Bank and the International Monetary Fund issued a joint report earlier this month that provided a sobering assessment of the country’s outlook.
According to the report, “the Russian economy is expected to grow by just 1.5 percent in 2019, before slowing again to 1.3 percent in 2020.” The bank went on to say that “growth is likely to remain weak until after the next presidential election.”
The paucity of foreign investment into the Russian economy is one of the most worrisome reasons the report cites for this disappointing outlook. That, coupled with the lack of capital outflows in 2018, was giving officials cause for some hope that the investment meltdown was bottoming out. But if Monday’s drop in the ruble against the dollar reflects anything, it is that foreigners’ appetite for Russian assets has not returned to normal.
Growth and the economy are not just important for national pride and influence; they are closely related to the fortunes of the prime minister. That is why the country’s leaders have spoken out about their deep disappointment with the World Bank/IMF forecast.
“One of the main issues is that this is an overly pessimistic assessment,” Russian president Vladimir Putin told an audience in Ulan-Ude, in the Ural Mountains. “We’re certain that the fundamentals of the Russian economy are very strong.”
He insisted that the government is working to put the economy back on track.
“We want the growth of demand and investment,” he said. “In the most urgent order is making progress in tax collection. That is not only a political priority, but also a vital economic one. We all agree that this is an urgent task.”
One area of concern is the amount of money that has left the country in 2018 — especially by way of dollars. Russians say they are not spending their money on a much larger variety of goods and services than in previous years, leaving the ruble and the Russian stock market weaker. The World Bank reports that the ruble has depreciated 21 percent against the dollar since mid-2017, while the Russian stock market has plunged 23 percent.