WHY THE RUSSIAN ECONOMY IS TUMBLING
The New York Times, April 12, 2016
The Article discusses the current state of the Economy in Russia, according to a recent report by the World Bank; the level of poverty in Russia is increasing at a faster rate. Recent analysis indicates that since the year 2012 Russia has been operating at a deficit a factor that has led to low oil prices and the country receiving various international sanctions which have crippled its economy.
Various factors have contributed to the deterioration of the economy in Russia, first is that the Country depends a lot on oil revenue which accounted for 43 percent of the government’s revenue in 2016, however this has been affected by the decline in the global oil prices.
The country has also received various sanctions by the European Union and the United States after the country annexed Crimea in 2014. The sanctions have further affected the impact of global low oil prices towards Russia and hindered them from borrowing from international capital markets. These factors have led to the deterioration of the ruble against the dollar since 2014.
Russia increased their expenditure towards the military at the expense of education, healthcare and infrastructure in order to return to the world stage. This overhaul has cost the country a lot of expenditure leading to a planned decrease in the defense budget for the year 2016.
As a result of the drop in oil prices and the deteriorating economy, Russia has been forced to source funds from the reserve funds which had been maintained by excess oil revenue and may further need to dig deep into the National Wealth Fund set aside to fund pensions but has been currently used for back bailouts and infrastructure development.
Lee, J. (2016). Why the Russian Economy Is Tumbling. [online] Nytimes.com. Available at: http://www.nytimes.com/interactive/2016/04/12/world/europe/russian-economy-tumbling.html?_r=0 [Accessed 19 May 2016].