Russia Calls off State-Funded Economic Stimulus

Russian President Vladimir Putin announced that he will no longer seek to boost Russia’s sagging economy through an influx of government spending. The move turned heads in the international press given that Putin, along with his minister of economy, had initially voiced their support for the measure. The announcement was coupled with a statement released by the Russian Finance Ministry urging Russia’s central bank to promote fiscally conservative policies in order to curb inflation and keep capital outflow down. Capital outflow had previously been a large source of concern for Russian economic officials, and has only continued to rise due to fall-out over the Ukraine crisis.

A drop in investment activity, coupled with already mentioned capital outflow concerns, could lead the Russian economy into a recession. Russia’s economy already shrunk by half a percentage point during the first three months of 2014, and given the present circumstances, could continue to dip as the year continues. The decision to withhold an immediate Russian stimulus plan suggests, however, that Putin’s inner circle is not yet overly concerned over the state of the Russian economy, and will continue to gauge its growth over the following several months. Nevertheless, if the last few months are any indicator, Russian economic growth is linked closely to sentiments surrounding Moscow’s political considerations, a factor that may prove unfavorable for Moscow if it follows through on threats to invade neighboring Ukraine.

News Briefs: 

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