How Rich is Russia : The Wealthiest Resources Country in the World

Russia’s economy has been a sore spot for more than two years now. Since the ruble crisis of late 2014 the role of the Bank of Russia has been to apply IMF-style counter-cyclical tightening to stabilize the situation in the wake of the decision to allow the ruble to float freely on the open market. That was the right decision then. It was the move the US did not expect President Vladimir Putin to make. It was expected Putin would hold to his natural conservatism and keep the ruble trading in the 30’s versus the US dollar as opposed to risking a collapse in exchange rate in the face of an historic drop in oil prices over the eighteen months between July 2014 and the low made in late January 2016. Oil dropped from $120+ per barrels to around $28 during that period. And if Putin hadn’t proactively allowed the ruble to fall from RUB32 to a high of RUB85 in early 2016 Russia would have been bankrupted completely Russia has taken moves to stabilize its economy from shocks and lack of access to dollar denominated markets, but Russia’s economy still remains troubled. It is far from being “structurally in excellent shape”. The Russian economy is still heavily concentrated in energy and lacks diversification. Energy is between 62-64% of export earnings (although the World Bank puts this number closer to 70%), and about 50% of government revenues. Chronic corruption and bureaucracy continue to stifle entrepreneurship. The IMF estimated that the state accounts for about a third of Russia’s economic output, 40 percent of value added and 50 percent of formal employment. The state’s footprint is bigger than its relative size because it lowers the efficiency of resource use and reduces competition. State procurement accounts for 28.5 percent of GDP, and it’s the biggest source of corruption. GDP growth has improved somewhat, but from very low levels. From 2014 through 2018, the Russian economy grew by an average of 0.5 percent a year. Forecasted growth for 2019 is 1.2 percent and 1.8 percent in 2020 However, much of that seems to be coming from state run projects. Private investment continues to fall, with fixed capital investment growth slowed down to 0.5 percent of GDP Putin has formulated 13 so-called national projects, which increase spending on infrastructure, health and education by about 1.1 percent of economic output per year from 2019 through 2024. This will total 25.7 trillion rubles (about USD 390 billion, or about 2.8 to 3.2 percent of GDP annually) for 2019-2024, and a good portion will be paid for with an increased VAT tax. This is impacting inflation Consumer price inflation, at 5.1 percent in May exceeded the CBR’s target of 4 percent in annual terms since the beginning of 2019, on the back of an intense VAT pass through effect. This is causing a frightening structure of household debt; households are paying out 50 percent of their income to service consumer loans, which account for 37 percent of the total debt amount, while real wage growth continues to slow. As a result, banks are extending loan repayment periods to make loans affordable, without considering the underlying purpose of the loan. Russia's banking sector remains relatively weak, with a lower capital adequacy ratio (12.2% as of April 2019) and a higher ratio of non-performing loans (10.4%) than in other emerging markets. Capital outflows remain chronic. Government interference and demands to hold bank balances in rubles led to net capital outflows in 2018 to increase to US Dollar 67.8 billion (about 4.1 percent of GDP) and led to a depreciation of the real effective exchange rate of 7.7 percent. Government set interest rates are high in order to protect the currency and try to staunch the chronic capital outflows, yet the outflows remain. This is not a sign of confidence in the government or the economy. The government’s efforts to stimulate the economy through centrally planned projects, funded by large VAT tax increases is actually having the opposite effect, causing inflation to move higher and consumers to become more cautious. Private funding rates are lower that government benchmarks in order to try and stimulate demand from a consumer that is not forthcoming. According to 2016 first-quarter figures from the U.S. Department of Commerce, U.S. GDP is around $18.1 trillion. Russia's economy is roughly a tenth the size of the U.S.' the World Bank stated that Russia's GDP in 2015 was $1.3 trillion.The U.S. is roughly half the size of Russia in area . Russia has taken moves to stabilize its economy from shocks and lack of access to dollar denominated markets, but Russia’s economy still remains troubled. It is far from being “structurally in excellent shape”. The Russian economy is still heavily concentrated in energy and lacks diversification. Energy is between 62-64% of export earnings (although the World Bank puts this number closer to 70%), and about 50% of government revenues. Chronic corruption and bureaucracy continue to stifle entrepreneurship. The IMF estimated that the state accounts for about a third of Russia’s economic output, 40 percent of value added and 50 percent of formal employment. The state’s footprint is bigger than its relative size because it lowers the efficiency of resource use and reduces competition. State procurement accounts for 28.5 percent of GDP, and it’s the biggest source of corruption. GDP growth has improved somewhat, but from very low levels. From 2014 through 2018, the Russian economy grew by an average of 0.5 percent a year. Forecasted growth for 2019 is 1.2 percent and 1.8 percent in 2020 However, much of that seems to be coming from state run projects. Private investment continues to fall, with fixed capital investment growth slowed down to 0.5 percent of GDP Putin has formulated 13 so-called national projects, which increase spending on infrastructure, health and education by about 1.1 percent of economic output per year from 2019 through 2024. This will total 25.7 trillion rubles about $390 billion, or about 2.8 to 3.2 percent of GDP annually for 2019 to 2024, and a good portion will be paid for with an increased VAT tax. This is impacting inflation Consumer price inflation, at 5.1 percent in May exceeded the CBR’s target of 4 percent in annual terms since the beginning of 2019, on the back of an intense VAT pass through effect. This is causing a frightening structure of household debt; households are paying out 50 percent of their income to service consumer loans, which account for 37 percent of the total debt amount, while real wage growth continues to slow. As a result, banks are extending loan repayment periods to make loans affordable, without considering the underlying purpose of the loan. Russia's banking sector remains relatively weak, with a lower capital adequacy ratio 12.2% as of April 2019 and a higher ratio of non-performing loans 10.4% than in other emerging markets. Capital outflows remain chronic. Government interference and demands to hold bank balances in rubles led to net capital outflows in 2018 to increase to $67.8 billion about 4.1 percent of GDP and led to a depreciation of the real effective exchange rate of 7.7 percent. Government set interest rates are high in order to protect the currency and try to staunch the chronic capital outflows, yet the outflows remain. This is not a sign of confidence in the government or the economy. The government’s efforts to stimulate the economy through centrally planned projects, funded by large VAT tax increases is actually having the opposite effect, causing inflation to move higher and consumers to become more cautious. Private funding rates are lower that government benchmarks in order to try and stimulate demand from a consumer that is not forthcoming. All these GDP false ratings are created in the West and work for the West. It’s the same as judging by the ratings, the best universities are located in the USA and Britain. But all international competitions in mathematics, chemistry, physics, programming, students from Russia always win in these competitions! Most importantly , Russian students do not graduate in debt. Russia is the Richest Country in the World in Terms of Resources! The abundance of natural resources is amazing and provides unique opportunities for growth and prosperity. Russia owns 30% of the world's coal reserves, 40% of oil, 45% of gas, 50% of shale, 44% of the world's iron ore reserves, 30% of chromium ores, 74% of manganese ores, 30% of rare earths, etc. etc. The country has 28% of world diamond production and 30% of precious stones. In addition, the third place in gold deposits. In addition, it is in second place in terms of the size of rare-earth mineral deposits, although they are not currently mined. And Russia holds the 1st place in terms of clean drinking water reserves! And in the next decade, the main product will not be oil, namely pure water! But the main value of Russia is not natural resources, but smart educated people! Russia has huge potential for growth! Putin stabilized the situation after the collapse of the USSR, the next step will be the growth of Russia! Best and most important they are the least indebted of ALL developed nations, If you release the assets held due to US sanctions and Ukraine didn't refuse to pay on its debt and Russia would be the only developed nation in the black with a positive balance... This allows them to produce and maintain goods at competitive prices because they have advanced all industry and agriculture not by choice, but due to sanctions! The sanctions have been a blessing in disquiet. When EU and the rest jump ship from the US and look to China, Russia wins automatically because they will be the main one to benefit off China wealth and profits buying Russian agriculture NON GMO and Russian Fuel! People forgot why current bankers were called loan sharks. Involving people in debt bondage and making money out of thin air is the favorite game of many bankers (but not all). Two World Wars in Europe were not a whim of monarchs and political leaders, these were banker wars, specifically it was the banking surname Warburg (initiators of two world wars). Russians differ from Europeans for the better, they are not so greedy, gullible and shortsighted, this is their great luck.












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