Russia’s economy minister Alexei Ulyukayev borrowed a quote from communist revolutionary Vladimir Lenin in his speech to the Gaidar Forum in Moscow today.
Ulyukayev cited the founder of the Soviet Union as he told guests at the economic summit that the era of peace is over to be “replaced by an era of relatively much more impulsive, spasmodic, disastrous, conflict”, according to Russian business daily Vedomosti. However, he assured his audience that there was “no reason to panic” because the Russian budget is healthier than it was in 2008.
The minister’s comment comes after months of turmoil for the country, as oil prices have plunged by more than 50% since June last year. Russia is still heavily reliant on the commodity to fund its government budget and fuel economic growth.
Moreover, the country has also been battered by a combination of Western economic sanctions that have frozen a number of large Russian companies out of international markets, and tit-for-tat sanctions imposed by Moscow on Western goods that have helped drive inflation up to 11.2% in December.
The country is now widely expected to fall into a recession this year, with the World Bank the latest institution to downgrade its forecasts. It now expects Russia to contract by 2.9% through 2015 instead of growing by 1.5%.
In his speech, Ulyukayev estimates that at $US50 a barrel, Russia’s federal budget will lose 3 trillion rubles ($US45.4 billion) in revenue. In order to accommodate this, the government will be required to institute 10% cuts to all departments other than defence, he said, and may have to take 500 billion rubles out of the reserve fund in order to cover the rest of the losses.
He advised people to look after their loved ones rather than worry about oil prices and sanctions.
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