Can ‘Putinomics’ survive?

In this policy brief, Kirill Rogov, Senior Research Fellow at the Gaidar Institute for Economic Policy (Moscow), examines the 2015 economic data and challenges widely held perceptions about the state of Russia’s economy.

While many Russians expect a ‘V-shaped’ crisis – with steep decline being followed by an equally steep bounce-back - Rogov argues that Russia’s economy is set for a longer decline. Though an immediate crash has been averted by a recovering oil price and devaluation of the ruble, it has come at the cost of significantly weakening both internal consumption and investment within Russia – affecting industries like automobiles, clothing and textiles and household goods.

According to Rogov, the future of Western sanctions towards Russia will play a vital role in determining the shape of this depression. Restrictions on the Russian financial sector are hindering Russian banks from providing the internal investment; repealing or even weakening sanctions might well promote capital inflow that the Russian economy needs.

Without such a change, Rogov posits that the Russian economy will likely undergo a ‘demodernisation’ process - a period of stagnation propped up by an authoritarian, anti-Western and autarchic ideology. He suggests that economic rebalancing within Russia will lead to a weakening and stagnation of consumption driven larger cities, but this could see the Kremlin lean more on smaller, more conservative towns to buttress Putin’s support.

• Primary Source

ESO: Background information: Does Putin Have to Escalate to Survive? http://www.europeansources.info/record/judy-asks-does-putin-have-to-escalate-to-survive/

---