Economy News

Vladimir Putin’s popularity has been built on the systematic erosion of his opponents’ credibility. However, after two years of recession caused by lower oil prices and western sanctions, Russia’s improvement won’t last long without structural reforms. Russia’s economic recovery has been very timely for Vladimir Putin, following high inflation rates in 2015-16, it suddenly fell to 3%. Moreover, the economic finally produced a positive 1.5% growth rates in 2017 after a -3.7% dive in 2015. Predictions for 2018 are continued economic stability with a growth rate of 1.8%

But dependency on oil makes Russia very vulnerable to price of energy, even if the rise in oil prices gives Vladimir Putin certain leeway, Russians are expecting more on the economic front. Putin can no longer rely on his victory in Crimea to sustain his popularity and oil still stubbornly accounts for 30% of the country’s GDP and 50% of the state budget. Putin’s ultimate success will depend on reducing Russia’s economic dependency on oil.  But during his speech on 1st March, he showed little interest in economic and social reforms and focused mainly on military and strategic issues. The Russian business environment is still marked by state interventionism and corruption. State capitalism owns 70% of the Russian economy today, most of the companies want to be associated with the state in order to get its full protection. However, this environment is causing distrust of investors both inside and outside the country and will ultimately impact on the whole the sustainability of the Russian economy. Thus stability might quickly lead to stagnation without major reform, which Putin is unlikely to carry out.

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