Russia"s economy dragged into recession

Just two rating agencies worsened outlook on the sovereign ratings of the country. In particular, the credit rating service Standard & Poor's revised its outlook on the Russian Federation from "Stable" to "Negative". Analogical conclusion was made by Fitch Ratings.

The change in outlook on the part of both agencies is motivated by geopolitical situation around the Crimea and the sanctions of the EU and the U.S. in this regard.

In particular, Standard & Poor's adjusted downward forecast for GDP growth in 2014 and 2015 up to 1.2 % and 2.2 % respectively (from 2.2 % to 3.0% in December 2013). According to the agency, the outflow of capital in the first quarter of this year is estimated at 60 billion dollars (at the level of the previous year as a whole).

The forecasts in light of the recent events were also corrected by the World Bank (WB). So WB lowered forecasts economic growth of Russia. According to estimates of the bank in 2014, the Russian economy is the best scenario will increase by 1.1 % (twice less than expected), with the worst combination of circumstances ( if the situation continues to worsen around the Crimea ) should expect a more severe recession . GDP contraction in this case is 1.8%. Forecast growth of the Russian economy in 2015 was lowered from 2.7% to 1.3-2.1 %. According to WB consumption growth rate will fall to 0.8-1.1 %, and capital will increase by 2.4 times.

But is this pessimistic outlook from the rating agencies due to the economic future of Russia exclusively related to the events surrounding the Crimea? Based on data from the Central Bank of Russia, it can be concluded that sanctions against Russia only accelerated the inevitable. Beginning in 2012, economic growth was descending. In 2013, GDP growth was only 1.3 % compared to 3.4 in 2012. Capital outflows last year amounted to 62.7 billion against $ 56.8 billion a year earlier. The outflow in the fourth quarter increased by half compared with the same period in 2012. Greater outflow was only in the fourth quarter of 2008, after Russia seized Abkhazia and South Ossetia in August. It is noteworthy that at the end of September 2011 at a congress of United Russia , the then President Dmitry Medvedev officially announced that they will produce with Prime Minister Putin castling places , and in the March elections Putin will be the single candidate from United Russia. In the next 3 months Russian capital flowed to 34.4 billion dollars, while in the previous 9 months outflow was at 47.5 billion dollars.

According to the Ministry of Economic Development in the first quarter of 2014 capital outflow will be about $ 60 billion , though the agency has planned a corresponding annual rate of 25 billion dollars, and the central bank is even less - $ 20 billion . It is noteworthy that in January 2014, when the notorious sanctions in connection with the annexation of the Crimea against Russia was not in sight , the export of capital amounted to $ 17 billion, according to official data, and $ 20 billion according to experts of the Higher School of Economics (HSE). It took more than just at the beginning of the crisis in 2009.

In 2013, for a variety of industries decline was already recorded. In particular metallurgical production decreased by 2.1 %, the worst figure since the crisis of 2009. For the Russian wood processing industry last year also became a failure. In the past year, four aluminum factories of Rusal and Baikal Pulp and Paper Mill (PPM) closed, while Solombal PPM is actually inactive. To this list should be added inactive Yuzhuralnickel and bankrupt Amurmetal, Zlatoust Metallurgical Plant, Novosibirsk Metallurgical Works and dozens of companies on the verge of bankruptcy. Volume of oil supplies fell by 1.5 %, and revenues of Russian oil exporters in 2013 fell by 4% to 173.7 billion from 180.9 billion a year earlier.

As a result, GDP growth in 2013 was the worst in the last 14 years if we do not take into account the crisis of 2009. So, the first year of Putin's presidency ended in 2000, GDP growth of 10%. In 2001, GDP grew only by 5%. A second presidential term in 2004 began with the economic growth of 7%. But beginning in 2008, the financial crisis has turned to Russia collapse of the economy by nearly 8 % in 2009. In 2010 and 2011 growth ranged at 4.3-4.5 % per year. The result of 2012 was the growth already at 3.4%.

Thus, it clearly shows that the Russian economy is already in recession, and the escalation of geopolitical tensions highlighted a hidden problem. Small victorious war to distract the population from the social and economic crisis has already been tried by the Russian oligarchic elite headed by Putin in 1999 (second Chechen campaign) and 2008 (the war against Georgia), respectively. But after anti-Ukrainian patriotic euphoria dies out, the effects of the crisis in Russia, anyway, will be felt by common people. According to the forecasts of the same Ministry of Economic Development , GDP growth in 2014 may will at best reach 1.8-1.9 % (previously 2.5%) and at worst - 0.6 % if the capital outflow for the year amounts to 100 billion dollars. Former Finance Minister Kudrin expects capital outflows in 2014 at the level of 150-160 billion, which exceeds the record figure in 2008, amounting to $ 120 billion. This means that economic growth will go to "0".