Russia's Looming Recession

Late last year, the RUB-USD exchange rate dipped significantly, which carried on into 2015 with the ruble’s unfaltering depreciation against the dollar. This now full-fledged currency crisis has Russia’s Central Bank bailing out its private banking sector and reinstating a unique quantitative easing strategy that aims to spur foreign investment and have a positive impact on GDP. Despite the government scrambling to stabilize its currency, economic recession in 2015 seems inevitable.

Low growth matched with a weak currency and a slump in commodity prices make for a very uncertain economic standing. This recession, however, won’t be as remarkable as most economic analysts had predicted. Regardless of their stagnant growth in the last decade and a GDP that seems virtually stuck since early 2008, Russia’s expected economic ‘disaster’ will likely play out as a mild decline of the GDP with minimal impact on its economy at the micro level. If Russia can successfully reboot growth, the post-recession period will be highly reminiscent of its 2010-11 economy.

Granted, Russia has to find some other ways to stimulate growth given the current state of political affairs. With Putin still recovering from the Crimean annexation situation, the added hindrance that the EU’s economic sanctions pose are still a very real problem for the Russian president. But, there is hope yet. With Russia's recent $3 billion bond buyout on Ukraine and a pretty solid outcome that results in the Ukraine defaulting due to its fledgeling debt restructuring program, Russia can be expected to be as assertive as ever when it comes time to cash in. This calculated risk might be just the thing Russia needs to sustain its growth, at least as a short term solution. Russia's longstanding success lies in mending geopolitical relations with its neighboring trade partners and, more importantly, the EU.