Monday, September 25

The worst is yet to come

Yevgeni and Vladimir run a unisex beauty salon in a neighborhood south of Moscowfrequented by local customers who pay in rubles. Two months after the start of hostilities in Ukraine and weigh to the apocalyptic omens previous years, their daily activity has barely suffered the onslaught of the economic crisis that hangs over Russia because the sanctions. Despite the fact that prices of the imported beauty products that you usually use have increased 30%which has forced them to increase your rates by 10%customers continue to visit the premises with the same frequency as before, and their income in local currency has hardly changed.

The -until now- few ups and downs of both hairdressers are a true reflection of the situation that the Russian Federation after the barrage of international economic retaliation that has fitted in response to the invasion of Ukraine. Economists and officials agree that for the moment, the effects of the new economic situation have barely been felt, but at the same time they warn that The worst is yet to comeespecially if the European Union (EU) ends up imposing a veto on energy imports from Russia, an activity that reports to the federal coffers between 35% and 40% of their tax revenue.

below expectations

“How is the Russian economy reacting? The simple answer is: well below expectations, but the worst is yet to come,” he wrote in a lengthy article. Sergei GurevSenior Research Fellow at the Center for Economic Policy Research and Professor of Economics at the Paris Institute of Political Studies (Science Po). “Our projections suggest that the current events (in Ukraine) are going to overtake the economic achievements of 15 years“, assesses in an analytical note the Institute of International Finance (IFF), an international association with 450 members that assesses risks and promotes policies in the financial field.

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The macroeconomic figures that the country will present at the end of this year will remind those of the fateful decade of the 90s after the disintegration of the USSR. At the end of 2022, the Russian GDP will have contracted between 8.5% predicted by him International Monetary Fund (IMF) and the 15% predicted by the IFF, although many experts believe that it will finally be around 10%, while inflation will rise to 20%, destroying one of the main achievements of the president of the Central Bank of Russia, Elvira Nabiulina: reduction to 2% per year of the rate of increase in prices of a percentage that only seven years ago, had two digits. All this will cause the country to lose positions in international rankings: from being the 11th economy of the world will become the 15th Hello 16th by the end of the year.

This state of affairs will worsen over the months, admits Nabiúlina herself, a renowned figure even in the West who, according to the Bloomberg agency, in the days after the invasion of Ukraine came to present his resignation, a resignation that was rejected by the Kremlin leader. The sanctions so far have hit “the financial sphere“, but from now on “will have a bigger impact on the economy in general“, the senior official has advanced. For now, to avoid hurt businessthe institution he presides over will avoid focusing its energies on fighting the inflationwith which the purchasing power of the citizens will feel drastically.

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Loss of jobs

With the economic contractionthe loss of jobs it will be almost inevitable, while the citizens are immersed in preparations to deal the possible blows. The Mayor of Moscow, Sergei Sobyaninhas warned that only in the capital, around 200,000 jobs are at riskwhile surveys indicate that a 85% of the population has stockpiled food in case of famine.

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“The blitzkrieg strategy economy has failed,” has proclaimed President Vladimir Putin with undisguised pride, using the same vocabulary used by the Western press to emphasize the failure of his Army on the battlefield in the first days of the armed conflict in Ukraine. This relative resilience of the Russian economy could be reversed in the event that the EU reach an agreement to veto the oil or gas imports from Russia, or some countries begin to apply such a ban individuallya measure already implemented by USA Y Canada. In 2021 alone, EU countries paid Russia €100 billion by sales of gas and oil, an astronomical amount that is being repeatedly denounced by the majority of Ukrainian leaders and which is presented by them as an EU formula to finance the war, not only against Ukraine, but also against the Union itself.

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