Things appear bleak for the Russian economy.
Weak global oil prices and sanctions over the Ukraine conflict created a recession which Russia has only recently been able to escape.
US President Trump may be a Russian sympathiser but American Congress isn’t: fresh sanctions are comming. A key advisor to Russian President Putin predicts that Russia looks set for a decade of restricted growth because of these sanctions and it will struggle to regain its position as a leading economy.
However, there may be light at the end of the tunnel.
GDP went up almost 3% year-on-year in June. That’s the fastest rate of growth since 2012.
This has been fuelled by growth in the natural resources and manufacturing sectors. Although, the service sector has yet to see a general rebound. Financial services in particular is in a bad shape because there isn’t much lending activity.
Interestingly, car sales were up 20% in July year-on-year, which analysts say is down to improved personal finances and suggests consumer demand is beginning to return.
Oil price stabilisation has also helped and with prices predicted to rise, we may see a partial revitalisation of Russia’s oil industry.
In the long term, the same advisor is pitching for key structural reforms: reducing state ownership of companies which are often inefficient and corrupt, increasing the pension age and taking steps to tax the rising shadow economy. All of these policies would raise much needed cash for the government.