In a stunning concession, the state-sponsored propaganda outlet Russia Today has reported that Renaissance Capital, the leading Russian broker of equities, has predicted that Russia could enter a recession in 2013.
The reason for this gloomy outlook is clear: Russia’s growth rate has plummeted from 4.3% in 2011 to 3.4% in 2012 to a projected 2.5% this year; but the latter figure is being handed out by the Russian government itself, and is clearly self-serving. Renaissance Capital doesn’t find it convincing, and believes that Russia could slip into negative territory before the year is out.
That’s because Russian growth in the first quarter of this year was just 1.4% and this fell to a mere 1% in the second quarter. If this pattern continues through the end of the year, Russia will be flirting with or in recession.
A second stunning admission came from another state-sponsored propaganda outlet, Russia Beyond the Headlines. It reported: “Energy prices were the only reason why Russia avoided a recession trough. Despite all the promises, or, to use the government’s rhetoric, ‘strategic plans’ to reduce oil sales proceeds to 5.6 percent of GDP, its share is still at least double that.”
And the Financial Times completes the picture, noting that even 4.3% growth is far below the level promised by the Kremlin, namely 5%. So even according to its own data, in the best case scenario the Kremlin will be at a level of economic progress by the end of this that is half what it targeted. In the worst-case scenario, Russia will be mired in catastrophic recession.
And the only thing that will stop recession will be oil prices over which Russia has absolutely no control. That is, Russia’s economic fate is held in the hands of foreigners, not Russian hands.
And the reason for all this is simple: Vladimir Putin. Putin has totally failed to wean Russia off what Dmitri Rogozin has called the “needle” of fossil fuel dependence, and he has failed to generate significant growth in any other major sector of the economy. In fact, many areas are a major drag on Russian growth.
The dramatically straight black line shown in the graph above depicts the Russian GDP rate in freefall, descending at the constant rate of nearly 1 point per year. That’s a 20% loss in growth from 2011 to 2012 and a 25% loss from last year to this one. Even under the government’s own projection, based on this trend next year would be even worse, with growth well under 2%, and recession would be inevitable, particularly if world oil prices decline. If the latter happened severely enough, Russia would instantly head into a major depression.
If not one but two Russian propaganda outlets are willing to admit things are this bad, do you dare imagine how bad they really are?