The World Bank has warned that the Russian economy is at risk of facing a recession. However, it is too early to make any definite forecasts due to a high uncertainty of macroeconomic situation. The bank states that GDP could contract by 1.8% this year if the political conflicts lead to a severe shock to economic and investment activities. If the East-West tensions continue to occur, this could greatly impact foreign investment, perpetuate economic stagnation and could even undermine Russia's own political stability.
Investors are pulling money out of the country, growth will be likely to decrease if capital outflows reach $100 billion. Capital has fled Russia, stocks are falling following Moscow's seizure of Crimea from Ukraine and Western sanctions against several Russian individuals. This situation has a negative impact on the economy worldwide, both in Russian and Europe.
The currency of Russia, the rouble, is down 10 percent against the dollar. Analysts have said steps are being taken to prevent the rouble from falling even more. This includes raising interest rates and spending billions in reserves to support the currency. This may push the country into a recession.
2 comments:
Political instability in Russia now definitely has an huge effect on future foreign investment. In order to maintain their incoming investments from abroad consistent, i think they should at least limit the military actions in of Crimea problem.
Russia being kicked out of the G7 (formerly G8) last week is also a sign of Russia's current economic status and a warning for Russia's future.
http://www.cnn.com/2014/03/24/politics/obama-europe-trip/
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