Russia – How is the Bear Holding Up?

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Mired in international scandal and regional wars, Russia has been making world headlines for all the wrong reasons in recent times.

Slapped with sanctions over her aggressive actions in the Ukraine not long ago, doomsday prophets were sure that Russia would collapse and a new era wouldn’t be far behind. The Rouble did tumble, and the MICEX did fall, but are things in Russia really as bad as many had predicted?

Certainly the Rouble has suffered as inflation has skyrocketed to over 12% for 2015 alone. Russia is paying out 10.6% interest on 10year bonds and admits the economy has contracted 3.8%, but blames energy prices and international conspiracy, rather than any fundamental economic problems.

Government debt has been steadily increasing, albeit slowly, and has crept up from 12% to 17% over the past year. This is still remarkably low, but it’s a sign that sanctions and low energy prices may be causing the Russian economy some pain, and the Kremlin is having to borrow more to bolster economic activity and placate the Russian people.

A quick look at business numbers shows industrial production is down 4.5%, manufacturing is down 6.1% and retail sales YoY have slipped by more than 15%. This has to have Russian economists extremely worried, especially as China slows and demand for energy will wane.

All in all, the bear is in bad shape. While nobody can really know what the picture inside Russia is like due to doubts about the unreliability of official data, even what is being reported is enough to cause concern.

Don’t touch Russia with a barge poll. It may be holding on, but if the current trends continue it won’t be long before Russia finds itself in a whole world of economic hurt, and the doomsday prophets may be proved right after all.

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