The World Bank has a new report out with a pretty gloomy outlook on the Russian economy, as though the political burden weren’t already heavy enough on Alexei Kudrin’s shoulders.  Moscow may be attempting to build a “new global financial architecture,” but these forecasts from the old one, though not definitive, still matter.  Obviously the critical puzzle will be fiscal policy – how much the state spends, how much it saves, while keeping everybody happy in conditions of rising unemployment.  From The New York Times:

As the global recession deepened last winter, Russia spent about
$200 billion, or a third of its precrisis foreign currency reserves,
defending the ruble during a gradual devaluation. This spring the
tables quietly turned
as oil prices rose, and the Russian Central Bank has made back about
$30 billion since March by intervening to prevent the ruble from
appreciating, the report said.

Yet other factors are weighing
on Russia’s prospects, the World Bank report said. A swoon in domestic
demand, worse-than-expected global growth, tight credit and declining
infrastructure investment are taking a toll, it said.

The
report did note some signs of recovery in Russia’s economy, including
earnings for companies and the budget from the higher oil prices.

Still,
because of the worsening outlook, millions of Russians will slip back
into poverty, the bank predicted. The percentage of the population
living in poverty, which had been on the decline for the last decade as
Russia seemed to put its post-Soviet economic woes behind it, will rise
again. The bank projected Russia would end the year with 17.4 percent
of the population, or about 24.6 million people, living in poverty.

Russian
policy makers, the report said, would increasingly find themselves
performing a “balancing act” of maintaining macro-economic stability
while meeting growing demands for social spending as poverty spreads.

Last 5 posts by Robert Amsterdam

• Grigory Pasko: Journalists Are Fleeing Russia - November 20th, 2009
• Evgeny Lebedev and the Londongrad Blues - November 20th, 2009
• The Obstacle of Pride - November 20th, 2009
• The Iron (Pipeline) Curtain - November 20th, 2009
• Yurgens: A Taliban-controlled Afghanistan is no picnic for Russia - November 20th, 2009