Staunton, February 7 – Despite Vladimir Putin’s upbeat treatment of Russia’s economy – and the echoes of his view by others – stories coming out of Russia show that his optimism is at least misplaced if not simply an outright falsification of reality. The last 24 hours have brought at least five important stories that better reflect what is going on. They are:
· One Third of Russian Economy is in the Shadow Sector. According to a new study by the IMF, 33.7 percent of the Russian economy is outside of the legal sphere, a decline from the 1990s but a level sufficiently high to limit the ability of the state to enforce rules or collect taxes and thus control the situation (kommersant.ru/doc/3541266).
· More than 90 Percent of Russian Industry Dependent on Imports. A new investigation by the Russian Academy of Economics and State Service finds that more than 90 percent of Russian industry now depends in whole or in part on imports, a major reason for concern at a time of sanctions (finanz.ru/novosti/aktsii/zavisimost-rossiyskoy-promyshlennosti-ot-importa-prevysila-90percent-1014990796).
· Russian Economic Growth Held Back Because Poor have No Money to Spend. In many countries, consumer spending drives economic growth, but in Russia today, the share of the population which is poor is so high that this is not the case. The poor don’t have money to spend and so the economy stagnates, the country’s labor minister admits (newsru.com/russia/07feb2018/bednost.html and politsovet.ru/57988-ministr-truda-udivilsya-padeniyu-dohodov-rossiyan.html).
· Russians Adapting to Crisis Rather than Fighting It. Moscow analysts say that another reason that the economy is in trouble is that Russians have adapted themselves to their worsening situation rather than seeking ways to overcome it (iq.hse.ru/news/214934281.html).
· Business Conditions in Russia Worse Than Those in Kazakhstan or Belarus. A Russian business group says that its analysis shows that conditions for the operation of businesses are far worse in the Russian Federation than they are in Kazakhstan or Belarus, thus limiting the attractiveness of Russia for outside investment and the ability of business people to make progress (fedpress.ru/article/1956942).
But behind each of these problems is an even larger one: All these conclusions are based at least in part on official figures, and analysts say no one knows how reliable they are about any economic question and cannot be certain just how bad things really are as far as unemployment or poverty are concerned (profile.ru/economics/item/124588-zanyatie-po-karmanu).