Is new crisis in Russia only year and a half away?

Is new crisis in Russia only year and a half away?

Russia's next economic crisis may erupt in the next year and a half, according to experts of the Centre for Business Tendencies Studies at ISSEK NRU HSE.

"If the trade war between the two largest economies in the world - the United States and China - hits the roof and, accordingly, the growth rates of these countries' economies are almost certain to slow down over a period of time, it will instantly lead to a noticeable reduction in world commodity prices and will create significant difficulties for Russia's main export," the 'Business activity of Russian industry in June-July 2019' review reads.

Trade wars may cause serious problems for the Russian budget - such as the weakening of the national currency, an increase in inflation, as well as a slowdown in an economy to the extent of recession, RIA Novosti reports. 

In addition, the review notes that the last global financial and economic crisis occurred 12 years ago, which is considered the average cycle time for the global economy.

"If top ten countries with the highest GDP enter a state of economic recession, and even worse - into a financial and economic crisis, it will inevitably affect the Russian economy," the document reads.

Professor of the RANEPA faculty of Finance, Money Circulation and Credit Yuri Yudenkov, speaking to Vestnik Kavkaza, agreed with the authors of the report, stressing that if the trade war between China and the United States continues at the same pace, then China’s purchases of Russian raw materials, as well as the devaluation of yuan could lead to crises.

"In 1.5 years we can build a lot of machine-building plants and produce products, which will be in demand in Europe, Africa, South America. In addition, we can sell not only coal, gas and oil, but also clean electricity. That is , we can prepare for this. We must change our actions to improve the situation," the expert explained.

"Objectively, internal processes in the Russian economy do not yet show a crisis. But the question is whether the impoverishment of the population will continue. If the real wage rate grows, then labor productivity and everything else should also grow," Yuri Yudenkov added.

The professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, also admitted that if the trade war between the United States and China goes too far, then it will certainly affect trade and the economy. "China and the U.S. will slip into recession, due to which the demand for key goods exported to Russia will decline," he said.

Speaking about the situation in Russia, the expert pointed out that while oil prices are at relatively moderate level, there are no signs of recession. "But now it’s more important when the U.S. economy plunges into recession. Unfortunately, now many indicators show that it's very close to this. In particular, for example, short-term rates have become clearly higher than long-term ones. This is an obvious sign of an approaching recession, because people they don’t believe in long-term prospects," Alexander Abramov explained.