Russia’s economic prognosis is dire.
Alexei Kudrin, who was Russia’s finance minister from 2000 to 2011, said, that within the next few years, Russia’s “reserve funds will be exhausted and they will have to raise taxes.”
Kudrin was speaking in London on Tuesday at a Moscow Exchange conference.
He said one of the big problems Russia faces is servicing its social security payments, particularly pensions.
Kudrin said Russia would have to find a way to cut pension payments and devolve budget powers to the regions.
He also said Russia should boost infrastructure investment by using funds earmarked for military and defence spending.
But with an election coming up in a few years and geopolitical risks increasing with airstrikes over Syria and tensions with Turkey, these types of reforms would be unlikely to happen soon.
“The main thing is we should change the economic structure,” said Kudrin. “What we’re seeing is that the current growth potential is quite low.”
This is an understatement.
Russia has been home one of the worst performing major world economies this year. It’s been squeezed by sanctions on government-controlled companies (of which there are about 1500) and an oil price crash.
It’s got both high inflation, at about 15%, and double-digit interest rates, making private financing for business difficult.
Here’s a map of how Russia’s been doing on a global level from HSBC:
And here’s its inflation rate compared with other economies:
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