Years after Russia forwent commodities as their primary growth sector, I, Jason Galanis, believe Russia now faces significant challenges in their economy—their economy may be more stagnant than anticipated.
In light of the annual VTB Russia Calling investor conference earlier this month, various investors and business leaders haven’t heard much different regarding the Russian economic situation. Some market analysts described it as ‘more of the same.’
One market observer, Central Bank governor Elvira Nabiullina, commented that ‘Russia’s problems are structural issues.’ Another, Sberbank CEO Herman Gref, commented that ‘companies [just] aren’t investing.’
It seems as if Russia’s steadfast instance of remaining monopolistic, yet open is what’s causing it to stagnate. The government is said to primarily depend of various state-owned gas and oil companies, such as the notable Rosneft and Gazprom, which has caused nearly half of the economy to sustain no competition.
Of course, observers and experts say nothing will change unless movements are made to ‘fix’ the underlying issues that may be causing the Russian economy to stagnate—that is, the core issues with both corporate and political governance.
On an ironic note, the shrinking markets, despite the open economy, may be one problem that could be fixed. Amidst the talk at the Russia Calling conference, some experts have suggested that ‘they would deepen and widen the local debt market to keep money going into Russia without solely relying on government banks.’
It’s a solution that highlights the fact that much of the movements in the Russian economy are being controlled by ‘the personal or political decisions from a select few.’
The issues with civil war in Eastern Ukraine, along with their response to such issues, more or less have caused human activity to stagnate in Russia as well. A tightening market and tightening policies have caused natives to move—and those who can’t move remain unable to stimulate the economy due to rising inflation rates.
It’s a situation where ‘stubborn’ might be the word to describe the state of Russia’s economy. Whether Russia officials, including famously steadfast President Vladimir Putin, will budge regarding their fast stagnating country remains to be seen.