More and more experts anticipate a bright future for Russia. Not so long ago, Le Temps, a Swiss edition, joined the company by publishing an article that urges everyone to get ready for changes. Those changes are believed to be closely connected with Russia, which is expected to see an economic boom this year. The author of the article says that this boom will be especially visible against the background of the continued eurozone crisis.
Is Le Temps right about the forthcoming Russian economic miracle? Let’s try to ponder on this question together.
Le Temps: It’s Russia’s Time?
The article looks like a song of praise written to laud Russia. The author gives the following arguments in favor of his standpoint:
1. In 2012, the Russian economy boosted by 3.6%. In 2010-11, it was 4.5%. However, we should be deceived by the temporary weakness.
2. In August 2012, the rate of unemployment declined down to the lowest level, which is 5.2%.
3. The rate of inflation stabilized around 6.5%.
4. The production completely recovered from the crisis decline. The industrial sector has been continuously growing since 2010.
5. Russian companies are taxed reasonably - up to 30%.
6. The income tax is quite moderate as well – just 13%.
7. Regular devaluations of the Russian Ruble reasonably controlled by the central bank allow Russia to withstand the pressure of today’s highly competitive global market.
8. Russia keeps expanding trade relations with numerous emerging economies, especially within the BRICS. Moreover, it is planning to enter South-Eastern Asia’s energy market, including China, Japan and South Korea.
At the same time, the author of the article gives a gloomy forecast for the near-term economic prospects of the EU. The forecast is based on the flowing arguments:
1. The Spanish rate of unemployment is above 26%.
2. Greece is neck deep in debts. It is on the verge of a social collapse.
3. Italy and Ireland have announced economic recession.
4. The British and French economies are about to fall into recession as well.
5. The price of saving the eurozone and its currency is too high. For now it is €50 bn. Yet this is not the limit.
The author abstained from mentioning other economic problems. However, these factors alone seem to be enough…
Russia and Temporary Difficulties
Obviously, any economy sometimes faces temporary difficulties. The author of the article named several factors potentially dangerous to the Russian economy:
· Corruption.
· Toughening of the domestic policy (probably, he means the relations between the government and Russian businesses).
· The Russian economy is heavily dependent on the export of energy carriers. Therefore, potential risks include an increase in the oil export in Iraq and Libya, which may lower the global price of crude oil. The expansion of shale gas production is another potential threat.
However, despite these factors, the Swiss journalist promises a bright economic future to Russia. The last line in the article published in Le Temps says that while Europe and Switzerland are busy self-reproaching themselves, there is a new sunrise in the East.
The Russian Ministry of Economic Development shares Le Temps’ standpoint.
The Ministry has given 3 possible economic scenarios.
The first one says that the Russian economy will be boosting by 5.4% a year on average till 2030. Within the next 4 years it will grow by 6.9%. The optimistic forecast implies that by 2030 oil prices will have reached $239 per barrel.
The chart below, courtesy of , reflects the current state of affairs in the market of Brent crude oil:
The second scenario (the worst one) suggests that the Russian economy will grow by 3.2% a year on average. Within the next 3-4 years, the growth will reach 3.5-4%. Crude oil will cost $118/b.
Russia’s triumph will happen against the background of Europe’s decline (even if it is partial). Even the US economy will grow by 2.8% at best. As for the EU economy, it is expected to grow only by 2.1% within the next 18 years at best. The worst-case scenario implies a 0.8% increase.
Will Russia Outpace Western Economies?
This question has always been a key one for Russia. The West seems to have never worried about that. For Russia this is a matter of principle. Indeed, Russia can boast the world’s biggest territory and most abundant mineral reserves, not to mention significant intellectual and cultural potential.
Whether Russia will outpace Europe, it remains to be seen. Anyway, Russian has got a perfect opportunity to do that in the near future.
