The state of the Russian economy in the short-run
Branko Milanovic looks at Russia’s recent economic history and predicts how the Russian economy might fare in the short term.
- The expected decline in Russian GDP in 2022—23 will probably be in the high single digits, or low double digits: it is not going to be as sharp as in 1992, nor as (relatively) mild as in 1998.
- The withdrawal of many foreign firms and the decline in foreign and domestic investments, will increase unemployment. Currently, Russian unemployment is low, but it could go back to 7-8% or more, as it was in the 1990s. The Russian safety net is not institutionally nor financially strong enough to maintain these people’s incomes at a reasonable level.
- Faced with such unstable and volatile food prices coupled with the return of high inflation, the prudent policy would be to impose rationing for all essential items. In the Soviet Union, rationing was eliminated in 1952, and then briefly reintroduced for some goods in Russia during the early 1990s. It may have to be reintroduced again, probably more broadly.
- To overcome shortages and sanctions a black market will develop. The criminalization of the Russian society, which has gone on since the 1990s and exploded under Yeltsin, will come back in force.
Russia’s economic prospects: the short-run
By: Branko Milanovic – Graduate Center of the City University of New York
Economists on the future of the Russian economy
This is from Chicago University’s Booth School of Business IGM Forum:
Markus Brunnermeier notes: ‘Growth was already low beforehand in Russia. Sanctions will take time to work.’ Patrick Honohan at Trinity College Dublin states: ‘Gas/oil exports can still pay for Russia’s imports. Recession more likely to be driven by collapse of domestic confidence.’ Christopher Pissarides says: ‘For as long as Russia can sell its oil it will have the revenue. It can then trade with Asia. But switching markets will be costly.’ And Robert Hall at Stanford observes: ‘Imposing autarky does not necessarily lower activity.’
Economists discuss the economic fallout of Russia’s war in Ukraine
By: Romesh Vaitilingam – LSE
If Russia defaults on its debt
If Russia defaults on its debt a wave of debt restructurings will be triggered, argues Joseph P. Joyce, as it will lead to a reassessment of the solvency of other emerging market governments and their ability to fulfill their debt obligations.
Foreign bondholders could decide to cut their losses by selling the bonds of the emerging markets and developing economies. A wave of such selling that occurs at the same time as the Federal Reserve raises interest rates will almost certainly lead to a new debt crisis for many countries.
The Restructuring of Sovereign Debt
By: Joseph P. Joyce – Wellesley College
