The rapid depreciation of the ruble, despite a dramatic – and seemingly desperate – late-night interest-rate hike by the central bank last month, has raised the specter of Russia’s economic meltdown in 1998. But, though Russia’s economy is undoubtedly in trouble, a full-blown collapse is unlikely.
The Communist Party of China would like the mainland Chinese population and the rest of the world to believe that the ongoing, sometimes violent protests in Hong Kong pose a threat of "terrorism." But the truth is that China has only itself to blame for pushing the city's idealistic youth into the streets once again.
Failed states used to be largely the preserve of the developing world, where the institutions of democracy do not have deep roots. But given the extent to which the Brexit campaign has undermined Britain's institutions through lies, it is reasonable to worry that the country will soon come to resemble a tinpot dictatorship.
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GENEVA – The rapid depreciation of the ruble, despite a dramatic – and seemingly desperate – late-night interest-rate hike by the Central Bank of Russia (CBR) last month, has raised the specter of Russia’s economic meltdown in 1998. Indeed, the West has sought to animate that specter in its ongoing confrontation with Russian President Vladimir Putin. But, though Russia’s economy is undoubtedly in trouble, a full-blown collapse is unlikely.
Oil and gas account for more than 60% of Russia’s exports; other primary commodities make up much of the rest. Given this, the recent sharp decline in world oil prices obviously represents a major shock – large enough, when combined with the effect of increasingly strict Western sanctions – to provoke a sizeable recession. To make matters worse, commodity prices are expected to remain low for some time. In that case, the income loss would become much more than a temporary setback.
But Russia is no economic basket-case-in-waiting – at least not yet. The situation today is very different from that in 1998, when Russia was running twin fiscal and current-account deficits. Russia needed to borrow, and it was borrowing heavily in foreign currency. This meant that as the ruble depreciated, Russia’s debts rose. Eventually, default became inevitable.
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