Crises in the Russian economy by year. World economic crises and their consequences on market and transition economies Economic crisis and regions
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At the end of November 2014, Russia's GDP went into negative territory for the first time since 2009. The drop was 0.5%, the Ministry of Economic Development reported on December 29. This is not the only anti-record of the year - on December 15, the ruble to dollar exchange rate fell by more than 8.5% in a few hours. By that time, the Russian currency had almost doubled in value since the beginning of the year. The previous anti-record for the ruble was recorded in January 1999. The devaluation was preceded by a decline in oil prices for five months, tightening EU and US sanctions and Russian “anti-sanctions”. The situation was aggravated by the decision of the OPEC countries not to reduce the oil production quota. After this, commodity prices collapsed, capital outflow and inflation accelerated. Gold and foreign exchange reserves continued to be spent, and the president's approval rating continued to rise. RBC decided to demonstrate how the situation changed throughout the year using nine graphs as an example.
This year, the Ministry of Economic Development revised the official inflation forecast three times. The initial forecast by the end of the year was almost doubled - from 4,8 before 9% . In reality, as Finance Minister Anton Siluanov said on December 25, “by the year, most likely, it will be somewhere 11,5% , maybe a little more."
If at the beginning of the year the economic bloc of the government and banks generally agreed that over 12 months GDP would increase by 2-3% , then already in the spring even minimal growth was called into question. The reasons for the decline in GDP are a decrease in investment inflows due to the situation in Ukraine, a significant slowdown in the growth of industrial and trade inventories, and low domestic demand.
Until mid-2014, oil prices remained stable within $105-115 per barrel. In September, quotes went down and by December fell to $60/bbl. In the most pessimistic forecasts, analysts predicted a price decline to $85/bbl. In addition, the Russian budget for 2015 is based on the average annual price of Urals oil in $80/bbl .
Throughout the first half of the year, the number of Russians approving of Vladimir Putin’s performance as president has been growing. In June, the president's ratings broke their five-year record. This was preceded by Russia's Olympic successes and the annexation of Crimea. Thanks to patriotic enthusiasm and mobilization against “enemies,” the president’s rating soared to a new high in October - 88% .
The volume of gold and foreign exchange savings in Russia exceeded the mark of $500 billion in January. As it turned out, only for a few days. During the year, Russia lost almost a fifth of its gold and foreign exchange reserves and reached a four-year low in this indicator. In this case, mostly foreign currency was spent. The reason was the Central Bank's foreign exchange interventions designed to support the ruble.
During the first half of the year, the ruble behaved as stable as oil prices. Since the middle of the year, its exchange rate to leading world currencies began to decline along with oil prices. On November 10, the Central Bank canceled the currency corridor and let the ruble float freely. The uncontrolled fall led to the fact that on December 16, the euro cost more than 100 rub., dollar - more 80 rub .
Imports began to decline in the second half of the year, after the introduction of EU and US sanctions. Exports behaved in a similar way - their decline slowed down only against the background of the depreciation of the ruble in the last months of the year. Experts explain the decrease in imports by the crisis in Ukraine, sanctions and a general deterioration in the investment climate, exports - political reasons and the fall in oil and gas prices.
Citizens' incomes throughout almost the entire year were close to last year's values. But the December collapse of the ruble changed the situation. Real disposable income, according to Rosstat, in January-November 2014 decreased by 0,3% . Real incomes of citizens will continue to decline in 2015, as expected, by 5-7% , they will be devalued by high inflation.
According to the forecast of the Ministry of Economic Development, capital outflow at the end of the year is about $125 billion(taking into account the forecast for the 4th quarter) - will almost reach the volumes of the crisis year 2008. It is associated with uncertainty in the economy, the transition to a floating ruble exchange rate and the annexation of Crimea. Contrary to expectations, the sanctions as such did not have such a noticeable effect - capital outflow increased sharply only at the end of the year, and the main reason for this was the fall in oil prices.
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The conflict between Russia and Ukraine as the cause of the crisis
At the beginning of 2014, many economists, both domestic and foreign, predicted that Russia would enter a new round of economic crisis, which began back in 2008. These forecasts came true, but the reason for this was largely not the prevailing economic situation within the country, but rather Russia’s participation in the events in Ukraine.
Starting back in 2013 with Kyiv’s Independence Square (Maidan Nezalezhnosti), where some Ukrainian residents opposed the rule of President Yanukovych, the conflict between citizens of this country escalated into a real bloody war. Part of the population, who saw a direct threat to their lives in what was happening, advocated intervention in this confrontation by Ukraine’s closest historical neighbor, Russia.
The government of the Russian Federation tried not to interfere in the affairs of Ukraine, but by spring the conflict within the country had reached such a level that one of its parts - Crimea - expressed a desire to leave the republic and held a referendum. The results of this event became a public statement by the population of the peninsula to separate from Ukraine and become part of its calmer neighbor. Ukraine, along with most of the world community, regarded the move of the Crimeans and Russia, which agreed to accept the peninsula into the Federation, as aggressive towards Kyiv. From this moment on, the open conflict between Russia and Ukraine began in 2014.
For Russia, the admission of Crimea to its territory was a turning point that turned most influential countries of the world against it. This became a catalyst in the development of the economic crisis in the country, the process of which we are now witnessing.
Western economic sanctions against Russia
As already mentioned, Russia’s step, which it positioned from the very beginning as an attempt to save part of the population of a fraternal country from the threat of war, was regarded as aggressive not only by the top of the Ukrainian government, but also by many Western countries with which Russia has partnerships. As a result, the USA, Canada, Europe and Australia introduced a number of political and economic sanctions against Russia:
- Some Russian citizens were entry and stay prohibited in the USA and European countries;
- The assets of giant resource companies were frozen, and cooperation with them was terminated;
- Were introduced bans on the import of weapons and dual-use goods from the territory of these countries to Russia for the purpose of using them in the Russian military-industrial complex, and military cooperation with Russia was terminated;
- Some European companies were “recommended” to stop financing investment projects implemented in Russia;
- Russia was expelled from the G8 and the Parliament of the Assembly of the Council of Europe, The OECD and the NATO Parliamentary Assembly stopped cooperating with it.
The Ukrainian crisis and the imposition of sanctions by the West, as well as the measures with which Russia responded to the United States and Europe, could not but affect the position of the national currency of our country. The exchange rate of a monetary unit is a multifaceted phenomenon, taking into account several factors of both domestic and international nature: the trust of foreign agents, the stability of the economy within the country, the measures of the Central Bank to maintain the exchange rate, and others.
Reasons for the fall in the exchange rate of the Russian ruble against the dollar in 2014
The Ukrainian crisis and the imposition of sanctions by the West, as well as the measures with which Russia responded to the United States and Europe, could not but affect the position of the national currency of our country. The exchange rate of a monetary unit is a multifaceted phenomenon, taking into account several factors of both domestic and international nature: the trust of foreign agents, the stability of the economy within the country, the measures of the Central Bank to maintain the exchange rate, and others.
For the Russian currency, the situation regarding these factors was as follows:
- Western sanctions and the opposition of Russia to some of the world’s influential states undermine confidence in the ruble in the world;
- The lack of investment from other countries reduces the production capacity of enterprises in our country and, as a result, introduces the economy into a stage of stagnation;
- Dependence on raw materials has made the ruble a resource currency, and in a situation where hydrocarbons become cheaper on the world market, the ruble exchange rate falls along with the price of petroleum products;
- The Russian population's distrust of the national currency and rising inflation expectations make the ruble poorly valued on the domestic market;
- The policy of the Central Bank, which let the ruble float freely, made it dependent even on fleeting sentiments on the currency exchanges.
As you can see at the moment, all these factors are not in favor of the ruble, as a result of which it continues its collapse, although now at a somewhat slower pace.
There are great fears in society of a repeat of the situation in 1998, when the ruble was devalued, and people unprepared for this financial process lost all their savings. At the moment, the situation is not so critical; no one recommends further undermining the position of the ruble by rushing headlong to buy foreign currency. However, it is still worth preparing an airbag for yourself - in any case, it will not be superfluous.
Dollar exchange rate forecast for 2015
Economists believe that the dollar will continue to grow in the future. The predicted maximum value of 1 dollar in 2015 is at the level of 59 rubles. However, its pace will gradually decrease, and the average price of the dollar for the year will be about 56 rubles. Many predict the strengthening of the ruble starting next summer.
However, in reality, it is very difficult to say anything specific. The situation is currently too unpredictable to make accurate forecasts. Most are inclined to believe that the economic situation largely depends on how the Russian government behaves in the near future.
We must understand that not only our country suffers from the above factors, but also other resource-producing countries, and along with them those who buy resources from them. In this regard, it can be assumed that even the dollar is not a stable currency now: a reduction in oil prices by eastern countries could lead to a shortage of hydrocarbons, because no one will sell them at a loss, and there are not so many shale reserves competing in price. Approximately the same situation applies to other economic and political factors, which at the moment are too shaky in their assessment.
When buying currency, you should not succumb to fleeting moods. It is more logical to wait for a little temporary calm in the foreign exchange market and, albeit small, but at the moment with a high probability of a possible fall in the dollar in cases where the “safety cushion” is built on this particular currency. Experts recommend taking two or even three currencies to store the value of your deposits: for example, the euro and the pound sterling. With this construction of your own currency basket, protection from the fall of the ruble will be greatest.
By the beginning of 2012, the economy had fully recovered from the crisis. This was influenced not only by high oil and gas prices, but also by sound budget policy, which made it possible to execute the federal budget without a deficit in 2011 and begin to increase the volume of replenishment of the Reserve Fund, which increased the stability of the Russian economy to external negative economic factors. The first placement of sovereign Eurobonds denominated in rubles was carried out, which is evidence of increased confidence in the Russian national currency and the ongoing budget policy.
In order to reduce the negative consequences of the economic crisis, the Government of the Russian Federation has developed a number of areas of financial policy for the post-crisis period:
Increasing the efficiency of the budget system, reducing budget expenses and the budget network, strengthening control over the expenses of recipients of budget funds through the Federal Treasury system;
Improvement of the banking system;
Improving inter-budgetary relations and fiscal federalism;
Eliminating debts to the state and reducing the risk of non-payments;
Adoption of a set of measures to protect the rights of investors and entrepreneurs;
Creation of legislative conditions for attracting foreign investment.
The first half of 2013 saw a further slowdown in economic growth that began in 2012. Since the end of 2011, GDP growth in annual terms has decreased from 5 percent or more to 1.6% in the first quarter of 2013 and to 1.2% in the second quarter. Overall, in the first half of 2013, GDP growth was 1.4 percent.
Figure 2.1 - GDP dynamics for the period 2011-2013.
The weakening of the real exchange rate of the ruble against the dollar in January-August 2012, according to the Bank of Russia, was 5.8% compared to the corresponding period in 2011, and against the euro it strengthened by 3.1%. The real effective exchange rate of the ruble to foreign currencies increased, according to the Bank of Russia, in January-August by 0.6% compared to the same period last year.
In 2012, the real effective exchange rate of the ruble will strengthen by 1.3 percent. By 2015, the real effective exchange rate of the ruble will depreciate by 0.8% as the current account surplus declines.
Whether there will be an economic crisis in Russia in the near future is the main question that worries society.
There are some underlying reasons why Russia could slide into an economic crisis within the foreseeable future.
According to the forecasts of numerous independent analysts, as well as experts from the Higher School of Economics, Russia may face another financial crisis in 2014. According to their arguments, such prerequisites were created in the country after the previous economic crisis, when Russia lost its investment attractiveness for a number of economic countries.
The first reason that made analysts talk about a possible crisis was government financial statistics updated in the summer of 2013. According to the latest data, Russia is experiencing a slowdown in economic growth, which is reducing its pace from month to month. The current coefficient in comparison with the same period of last 2012 is at just over one percent, which, among other things, may relate to the error of statistical data and in reality give a zero result.
At the consumer level, there is also a certain oversupply of loans, which has led to people resorting to new loans to pay off old ones. This, in turn, does not bring income to the country; moreover, the debt burden on ordinary people and individuals has reached enormous proportions, and it is possible that the country will soon face massive defaults associated with these loans. It goes without saying that in such a situation there can be no talk of growth in consumer lending, and, consequently, the consumer basket. People will not be able to take out loans for purchases, trade turnover will increase, and the economy, again, will not benefit from this.
If you look carefully and compare the data on the quantity and quality of the population of the Russian Federation, you can come to clear conclusions: the population remains unchanged, but the share of economically active Russians is decreasing. In other words, there are more pensioners and children, and fewer working citizens. And this is the economics course of the first six months of the institute: an aging population means a decreasing number of workers and workforce potential, but not a decreasing number of consumers. This structural composition will not be able to ensure rapid economic growth in the country. This situation is partly an echo of pension reforms and amendments to pension legislation. Thus, over the current year in Russia the number of entrepreneurs has become noticeably smaller; statistics indicate a striking figure - about half a million people. The reason for this was a twofold increase in pension contributions.
In addition, the pace of construction, the level of consumption of goods and services has noticeably decreased, and external demand for products exported by the country has also fallen.
Despite the optimistic forecasts of the Russian Ministry of Economic Development, most domestic and Western analysts are inclined to believe that the next financial crisis in Russia in 2014 is not prejudice, but a very real disappointing forecast for the near future. Recently, there has been a slowdown in the pace of development of the Russian economy, due to the fact that the oil and gas sector can no longer cope with the role of the “locomotive” of economic development.
The government of the country places great hopes on all kinds of innovative programs that should contribute to the development of entrepreneurial activity. Despite the fact that some experts consider talk of an impending financial crisis to be premature, it is worth recognizing that 2013 did not get off to a great start. Thus, due to increased insurance premiums in the country, more than three thousand entrepreneurs curtailed their business. That is why the financial crisis in Russia in 2014 is quite expected, and many analysts say that the Russian economic model, tied to the sale of raw materials, has exhausted its potential.
It is difficult to make accurate predictions in economics, given that they are not based solely on analyzes of macroeconomic indicators. As a rule, the economic state of a country is also greatly influenced by politics, sociology and ecology.
The harbingers of the crisis in 2013 were the long-awaited slowdown in price growth (to 6.1% per year) with an increase in the unemployment rate (to 5.3%) and a fall in real disposable income (by 1.3% per year).
Crisis 2013 in Russia
on kickbacks
The fundamental cause of the crisis is the diminishing impact of monetary stimulus on the economy. Previously, the goal was to double GDP through a constant increase in the money supply. To put it simply, a double rise in prices can be fought through a double increase in wages. Over time, this policy became less and less effective: businesses began to operate on kickbacks, and every fifth person learned to steal. Kickbacks are a percentage of money received in a business for the purpose of continuing the business. A brief summary of this management method is presented in the video:
It is good for the economy when it complements and does not change it. In large companies, the desire to get a kickback leads to the fact that decision makers give preference to unprofitable partners over profitable ones. The crisis in Russia stems from the fact that kickbacks that accumulate in bank accounts sometimes exceed all other expenses that contribute to economic growth. A natural consequence of the rollback method of doing business was a slowdown in the growth of industrial production to 0.1% and a drop in investment in buildings, structures and others by 1.6% per year.
Declining competition in Russia
The consolidation of retail trade to the level of hypermarkets has led to the disappearance of competition and a decline in product quality. has emerged in all spheres of the economy, including fair trade. Competition for the consumer has been replaced by competition for the patron, bringing the economy closer to the dashing nineties. There were so many low-quality products that it brought down the overall level of inflation, but spurred an increase in the prices of the highest quality goods and services. In this situation, there is no point in trying to give people money, since it will not work to increase the gross domestic product. Rational behavior - transferring money abroad to pay for higher quality purchases. In the first nine months, capital outflows amounted to $48.3 billion. In the Soviet Union, supply was stimulated by the introduction of efficient agricultural methods: 
In Russia, intensive agriculture is traditionally associated with foreign technology, which will become more expensive as the ruble depreciates. There is no hope for Belarusian agricultural engineering yet. *** In 2013, all the prerequisites for a crisis in Russia took shape, the main ones being business on kickbacks and a drop in competition. The economy stopped growing naturally. The Ministry of Economic Development's forecast for Russia's GDP growth for the year is 1.8%. The graph of Russia’s GDP clearly shows that it will be difficult to reach even 1.8%: 
In order to avoid catastrophic consequences, it required periodic freezes of tariffs for the services of natural monopolies and wages.
Crisis 2014 in Russia
Economic effect of the Olympics in Sochi
The fight against the crisis has taken away part of the stimulus from the Russian economy, which will return with the end of freezing tariffs for housing and communal services and salaries of public sector employees. As a result, when transitioning to a new model of economic development, it will be necessary to increase external resources. In 2014, Russia will face another crisis related to the Olympics in Sochi. The main reason is that the Olympics, like any artificial stimulus, creates addiction. The state, together with some construction companies and business in general, contributed to the Sochi Games budget in the amount of 1.5 trillion rubles, with their costs casting doubt on the economic effect of the event, which was estimated at a third of this amount. 
Surviving Sochi for Russia is a doubly challenge, because the Olympics have a clear geographic connection to the Krasnodar Territory. No one argues that at first the Games will have a positive impact on the structure of the population and its income, but after them the local population will have to return to their previous structure and level of well-being. It should be clarified that the 2014 crisis will be accompanied by purchases of foreign currency and sales of the ruble. This threatens to undermine the stability of the currency system and greatly increase business purchasing imported equipment. We can predict an intensification of crisis trends in industry and a slowdown in Russian GDP growth to 1%, despite the Olympics.
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Since the end of the last century, Russia has experienced two major crises. At the moment, we can observe the development of something new in our economy.
In the article we will analyze what caused the crisis in the country's economy at different times, and what consequences these events had for Russians.
The situation in 1998, which is more often called “Default,” was a consequence of the domestic economic policy of 1992-1998 and the “Asian” crisis. Experts believe that one of the main reasons for the default was the unstable political situation in the country. Yeltsin, together with the government, tried to form a market economy and minimize state influence on business development, and the State Duma sought total control over financial flows.
As a result of internal strife, the country's economy suffered. To curb inflation, the money supply in circulation was reduced. The population was not paid wages and pensions, and financial obligations to budgetary organizations were not fulfilled. At the same time, high taxes remained. Most enterprises have switched to a barter form of remuneration.
The Duma adopted unbalanced budgets in which expenses were not covered by income. To eliminate the imbalance, GKO obligations were issued, for which the public debt grew. In 1998, the GKO system turned into a pyramid, because old obligations were covered only by attracting new ones. In addition, restrictions on the export of capital from the country were lifted.
The state's internal and external debt increased, and the possibility of its repayment decreased. By the end of 1997, interest rates on loans and government obligations began to rise sharply, and the stock market began to fall. The government tried to obtain additional loans from the IMF and the World Bank.
At the same time, prices for raw materials fell significantly, and a serious financial crisis broke out in Southeast Asia. As a result, on August 17, 1998, a technical default was announced on government bonds of the Russian Federation. The policy of containing the ruble exchange rate within a narrow corridor was recognized as untenable, and it was replaced by a floating exchange rate. The ruble to dollar exchange rate jumped from 6 to 22 rubles in six months.
Unprofessional economic management and confrontation between political forces led to a severe crisis. Inflation rates were forcibly reduced, but production fell into decline. Investors began to leave Russia, and capital flowed abroad.
As a result, the standard of living of the population decreased, and inflation became galloping. The confidence of the people and investors in the state and the banking system has fallen for many years. Many banks and enterprises went bankrupt, and the population lost all their savings.
There have been no previous cases in world history when a state defaulted on domestic debt in national currency. Usually money was printed and domestic debt was paid off.
Among the positive consequences of default, there is an increase in the competitiveness of enterprises and export efficiency, and a general strengthening of the economy and the monetary system. Monetary regulation became much softer, the amount of money in circulation was no longer limited, and budget discipline increased, which led to a normalization of the financial situation.
2008-2009
The 2008 crisis in Russia was a consequence of the global financial decline.
However, our economy was hit harder by the American credit collapse than in developed countries due to the country's dependence on oil, which fell to $40 per barrel, unprofessional government actions and aggressive policies towards Georgia.
Economists believe that the recession began in May 2008, when Russian stock indices stopped growing. After this, the market began to fall. The deterioration of the investment climate in the country was noticed after the attack on Mechel, government actions against foreign and domestic business and aggression in Georgia. During the Georgian conflict, our stock exchange experienced one of the worst declines in the last ten years.
The war in Georgia pushed investors to flee the country, and the general instability of world stock markets and the fall in oil prices aggravated the situation. The huge external debt of Russian companies and the inability to access Western loans have led many organizations to turn to the government for help. Unemployment increased and the ruble devalued.
At the beginning of 2009, it became clear that we were facing a second wave of problems associated with non-repayment of loans and falling oil prices. According to Forbes magazine, from May 2008 to February 2009, the number of Russian dollar billionaires decreased from 110 to 32 people.
However, in December 2009, the government announced the end of the active phase of the crisis. The consumer price index in 2009 increased by 8.8% - this is the lowest inflation rate in the country's recent history. The fall in GDP in 2009 was 7.9%, which was the worst result among the G8 countries.
In March 2010, Forbes noted that the number of dollar billionaires had doubled again to 62 people (although before all this there were 110). The improvement in the situation is due to rising oil prices and stabilization of stock markets.
Economy 2014-2015
There is an opinion that our economy has never crawled out of the hole of 2008-2009. Structural problems were accumulating and at some point were bound to burst into the open. Starting in 2013, the economy began to slow down, and the foreign policy of the country's leadership led to an aggravation of the situation and financial decline.
The peculiarity of the crisis of 2014-2015 is that it developed only in Russia. European countries showed little economic growth, and the United States was at the height of its investment attractiveness. Against this background, the decline of the Russian economy looked most gloomy.
The main source of income in our country is the sale of energy resources, and production plays a secondary role. The problems of 2014 were aggravated by the fact that the price of oil began to fall sharply, reaching $57 per barrel at the end of the year. When forming the budget for 2014, the government was based on a price of $93 per barrel, so such a sharp drop had a detrimental effect on the financial situation.
Another factor that pushed us to the precipice was the annexation of Crimea and aggression against Ukraine. As a result of the actions of the Russian authorities, European countries, Canada, Japan, New Zealand, Australia and the United States imposed economic sanctions against a number of companies, credit institutions and individuals. The financial blockade and the closure of access to international capital have put many businesses and banks at a disadvantage, depriving them of cheap money.
In response to Western sanctions, the Russian government introduced a moratorium on the import of certain types of products from abroad, which fueled inflation and worsened the economic situation.
Thanks to foreign policy and retaliatory sanctions, a sharp outflow of capital began. The devaluation of the ruble and growing inflation caused panic among the population, who rushed to buy foreign currency. Inflation in 2014 amounted to 11.4%, in January 2015 in annual terms it reached its maximum since May 2008 - 15%, and in monthly terms - its maximum since February 1999 - 3.9%.
The rise in prices was also facilitated by the policy of the Central Bank. The increase in the key rate in December 2014 from 9.5% to 17% provoked a collapse in the foreign exchange market, as a result of which the US dollar and euro reached historical highs. In addition, the rate increase led to an increase in the cost of loans.
As a result of the crisis, Russia lost its status as a promising market. A rapid recovery from the difficult situation and a return to high rates of economic growth, as was the case in 1999 and 2009, was impossible.
Policy reforms and structural changes are needed to diversify the economy. There is also a high probability of strengthening sanctions, which, against the backdrop of an outflow of investment and cheaper oil, excludes the possibility of economic growth in the coming years.
In 2015, due to the depreciation of the ruble, wage freezes and rising tariffs, the level of consumption fell sharply, which, combined with a stop in consumer lending, led to a fall in GDP and a crisis in the financial sector. The influx of funds from export-import operations has decreased, and this has slowed down construction and real estate prices have fallen.
Crisis of 2017 - 2018
The main problems of the Russian economy remain low oil prices, a tightened regime of economic sanctions, as well as internal problems (high level of corruption, poor investment climate).
The good news, however, is that the worst is over. 2016 was the last year of economic recession, and in 2017 modest economic growth began. If the government does not take any steps that sharply worsen the situation, the economy will remain stagnant, demonstrating low rates of economic growth while maintaining the current level of real income and quality of life of the population.
Posted by Markovka (@lubovmarkov) Jun 3, 2014 at 9:55 PDT
Read the article about that, as well as our material about that, and remember that a crisis is a time of opportunity.