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How Will The Russian Economy Survive 2017?


How will the Russian economy survive?

During her speech at the Gaidar Forum, the head of the Account Chambers of Russia, Tatyana Golikova, bemoaned that the effectiveness of public investment in Russia has dramatically decreased.

 

“It seems that during the crisis periods 2014, 2015, 2016 the state would allocate funds for investment, but what is happening to them in reality? In reality, what’s happening to them is quite a serious spending failure, quite a serious decrease in the efficiency of public investment,” she declared.




Golikova criticize the fact that in 2017 Russia plans to double borrowing on the domestic market in comparison with 2016.

“About 30% of domestic borrowing is taken by foreign investors, and there are also certain risks there in terms of borrowing such large amounts, including subsequent costs on servicing the public debt,” she stressed.

 

In her opinion, the Russian economy is still oil dependent, that is why she recommends in the first half of 2017, the country should save and not spend the additional budget revenues received from increased oil prices.

 

For every one dollar reduction in the price of oil, Russia staggeringly suffers billions of dollars in loss of revenue. The Russian economy is certainly looking up with hope to 2017, especially after struggling for two years. It is in a a better position than at the start of 2016, when oil was falling below $40 a barrel, compared to today, where oil exceeds $52 a barrel.

 

With the oil price slowly rising, the Russian economy could be back on its feet, but how far will the the price of crude increase? It could be a head fake that, in the end, presages a serious downside in price as American shale oil producers come back on line, attracted by higher dollars for the commodity.

 

Discussions about the cure for the Russian economy have continued as the Gaidar Forum 2017 proceeds. The Ministry of Economy has traditionally made a bet on private investment – keeping in mind that macroeconomic stability and administrative barriers continue to be among the main risks to economic growth.

 

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