Posted on 02/22/2009 9:20:14 PM PST by TigerLikesRooster
Russian boom ends as resource wealth vanishes
Economy, stocks and currencies tumble, threatening Putin's political legacy
By Polya Lesova, MarketWatch
Last update: 6:42 p.m. EST Feb. 20, 2009
NEW YORK (MarketWatch) -- The reversal of Russia's fortunes is nothing short of a Chekhov drama. A seven-year economic boom fueled by cheap credit and soaring commodity prices has come to an abrupt end, plunging the country into the worst financial crisis since its 1998 debt default.
Russia's economy is expected to contract by at least 2% in 2009 after growing at an average rate of 7% in recent years. Stocks have fallen 18% this year, after losing three-quarters of their value last year, cementing Russia's place as one of the worst performing emerging markets. The ruble has lost nearly a third against the U.S. dollar since July.
"We're quite worried about the macroeconomic picture in Russia," said Lars Christensen, chief analyst at Denmark's Danske Bank.
This sprawling country of 142 million people owes its past success, and its current woes, to this decade's wild ride in commodities. Its economy heavily depends on revenue from oil, natural gas and metals. Prices in these commodity exports have plunged amid the global economic slowdown. Oil has lost 73% since hitting a record high above $147 a barrel in July. As a member of the once-mighty BRIC club of large emerging markets, Russia exemplifies the fragility of growth built on commodities as well as the sharp reversal of fortunes in the emerging world. What's particularly alarming about Russia's troubles is that they come at a time when its overleveraged neighbors in Eastern Europe -- from Ukraine and Latvia to Hungary and Bulgaria -- are struggling to contain their own economic meltdown.
(Excerpt) Read more at marketwatch.com ...
People like Putin could have figured that they cornered this capitalist thing, and now use it to their advantage to torment his nemesis U.S.. He does not realize, though, how tenuous his grasp of capitalist economy is. Especially, its feedback mechanism, made all the more tangled up, by leveraged global finance.
Ping!
This will not end well.
Look for Russia to start selling gold reserves to raise quick cash.
I think as Putin is scheming to bring back a form of the Soviet, his intent is quite similar to that of the Socialists advancing their agenda here in the U.S.
They have some platinum, nickel, oil, natural gas and other vast resources. I won’t be crying over their plight.
Seems like Russia is weathering this better than most. Only a 2% decrease after 7% increases year after year....
Russia doesn’t have as heavy of debt, and is owed by the EU and the US from loans made to them. However, lower energy and commodities prices are harming them.
The Chinese, on the other hand, are having problems with their manufacturing sector.
What I meant is that the US owes hundreds of billions, and the EU, trillions of dollars to Russia. Most of the Euro oil was brought on credit.
The Saudis, the U.A.E. and even our gains in Iraq are in jeopardy from the collapse of oil and other resource prices. And then there is Indonesia, another heavily resource oriented economy.
I think it is spinning out of control. I think India may have to step in because others are busy dealing with their own problems.
Some HUGE amount of capital has been vapourised and is NOT included in GDP figures, et al.
>>You seem to have omitted the 80% drop in their stocks. Why?
Fears of nationalization or state control, especially in the wake of the Georgia moves by Putin.
Is there any country, other than Israel, that has avoided this meltdown?
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