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Russian Economy Dramatically Impacted by Economic Downturn

Posted By Yevgeny Volk On May 6, 2009 @ 10:02 am In International | Comments Disabled

 Hundreds of Russians queue outside an office of a state-run employment company in central Moscow 25 November. Russian unemployment could be running at more than eight million, a government minister admitted earlier this month, though the official figure is much lower because millions of jobless have slipped through the social net. Hundreds of thousands of Russians are believed to have lost work during this year's financial crisis, the majority of them in Moscow.

Unemployment is increasingly raising its profile in Russia’s crisis-hit economy. Last March it was at a record 40-percent high. The official data show that its level over the first quarter jumped from 6 to 7.5 million people, which is around 10 percent of Russia’s labor force. According to independent assessments, unemployment could well be even higher – 7.8-8.5 million.

The authorities have responded to a sharp increase in the numbers of those laid off in a purely bureaucratic manner. If the government dislikes certain statistics, it only needs to suppress the actual picture. On the order from on high the Russian statistics agency (Rosstat) discontinued its monthly publication of unemployment data. Now, the statistics is to be made public once every quarter.

Unemployment dynamics forecasts in Russia are pessimistic. Independent experts maintain unemployment will not stop rising, and its latent forms traditionally prevailing in Russia could well surface owing to the inevitable shrinking of both official and shadow economies.

The other crisis characteristics are also small comfort. A 9.5 percent GDP slide in the first quarter has placed Russia in the top, but a hardly honorable, position among the G-20. Businesses have yet to feel the full effect of the government’s bailout package.

Proposals to optimize Russia’s taxation system that the government is looking into envisage some tax cuts, particularly for small and medium business. But there is no guarantee the Finance and Economic Development Ministries’ proposals will get approved.

As for its customs-tariff policy, the government is increasingly pursuing open protectionism. Russian commodities uncompetitive on domestic markets will be protected with raised import duties. They are to cover a wide range of hardware items, household chemicals, cars and foodstuffs. Prime Minister Vladimir Putin has openly gloated recently that Russia’s non-accession to WTO yielded it certain benefits – Moscow does not need to reckon with WTO’s anti-protectionism measures.

Moscow’s efforts to have a larger profile in governing the energy sphere internationally are also stalled. Conceptual Approach to the New Legal Framework for Energy Cooperation initiated by President Dmitry Medvedev has met with a cool reception from the West and especially from the European Union. Many westerners construed it as an ill-camouflaged policy to lobby the interests of Gazprom and other Russian energy majors.

It looks like the document was as usual prepared in haste, and some of its items to be subject to international legal regulation aroused bewilderment. For example, it lists asphalt road coating, fuel timber and charcoal. This check-list seems to have been thoughtlessly borrowed from a directory of standard classification of foreign economic activity and is indicative of the Russian bureaucracy’s low professional standards and formalism.


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