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How is Russia not Financially Crippled?
(lemmy.world)
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this post was submitted on 17 Jan 2024
329 points (98.2% liked)
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An economics student from Russia here, here's my perspective.
First, is that a country's economy is a lot less volatile than we expected. There is also another factor that played into it. During covid, Russian companies amassed a sizable amount of inventory that was already inflated compared to European companies due to how volatile our economy is. This has given them enough time to reroute supply chains once sanctions hit.
Basically, the so-called "grey import" plays a major role in assuring the stability of our economy. Companies either route their import/export through neighboring countries or through affiliated companies.
Second is the competency of our central bank. After most of the major banks were cut off from SWIFT (used for international transactions), they raised the key rate, limited the amount of money you can cash out at one time, and did some other stuff. Higher key rate = higher deposit interest rate, but at the same time, credit became more expensive. All of this was needed for preventing banks from defaulting. Once panic died down, the changes were reverted. Now, they're dealing with inflation.
Lastly, the majority of our budget comes from oil and gas. Since Europe didn't want to buy it, Russia started selling it to Asia at discounted prices. Quantity of oil/gas sold drastically increased, which mitigated reduced prices and led to a surplus budget. Not to mention that they started pushing on large companies to reduce the amount of dividends and instead re-invest the money.
I wouldn't call it "thriving," however. All of this has definitely led to a slowdown in growth, which, as time goes by, will only get worse. But for now it's fine.
The central bank has been surprisingly competent. But it seems like they're often trading short term problems for long term ones, so we'll see how they deal with them.
What do you think of this assessment? You agree, or is William Spaniel missing some stuff? https://youtu.be/ecdxs8Al424
They guy did his research, and he did it right. Even mentioning the "social contract", that's not something you hear from an average youtuber.
There's only a few things I've noted
Although the monthly rate can be calculated as yearly÷12 and is acceptable, it is inaccurate. Doesn't change much, but still. ( (1+monthly rate)^12 = 1+yearly rate <= this is the accurate conversion)
Next is "failed pension reform." It's failed in political sense. The intent of it was to temporarily lessen the depletion of pension fund, which it technically did do. But, yeah, it was absolutely not popular. Not to mention that it didn't solve the root of the problem, which was obvious from the start. Back during his first or second presidency period, he promised not to raise the age for retirement, yet in 2018, he did exactly that. Needless to say that his ratings have been falling ever since then and up till February of 2022.
The one thing I would've liked him to also mention is "quality of foreign exchange earnings," which is a relatively new term. Essentially, companies now need to pay attention to wether or not they can exchange earned currency for something that they can trade with other countries or within Russia. Previously, they traded in dollars, so it was never an issue.
Very informative, thanks
Great insights. Thank you.