“Coming Back to1990s:” Expert Predicts Crisis in Russia

“Coming Back to1990s:” Expert Predicts Crisis in Russia

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“We are facing a crisis. There was a similar crisis that led to the collapse of the USSR and so, I wouldn’t call it unprecedented,” says the economist Dmitry Golubovsky.

The economic situation in the world and in Russia in particular, remains quite tense. Oil prices are very low, and the exchange rate has fallen to 80 rubles to the dollar. In addition, the coronavirus, which has hit the world, hinders development of the already dented economy.

The Russian government is considering a number of measures to help small and medium businesses survive and, therefore, keep up jobs. Along with it, the instruments of social support for the residents are being discussed.

According to some experts, we are witnessing the beginning of one of the most serious economic crises in the history of modern Russia. For example, economist Dmitry Golubovsky said in an interview with SP that the current crisis could push Russia back “into the 1990s.” Moreover, it would last for quite a long time.

“We are facing a grave crisis,” said Golubovsky. “There was a similar crisis that led to the collapse of the USSR. So, I would not call it unprecedented. We are gradually coming back to the 1990s when the country's consumption dropped by 20%. If we convert current oil prices into dollars in the 1990s, the present cost of a barrel of oil is less than $10. Let me remind you that the USSR collapsed when oil prices dropped from $35 to $20.

“I do not know how long Russia may hold out. Anton Siluanov, the minister of finance, specifies a term of 3 years, after that that of 5 years and then of 10 years. However, the exchange rate is the main problem. At the rate of 120 rubles to the dollar the reserves might not be spent at all. At the same time, absolutely everything in the country that is connected with supplies of imported equipment will come to a standstill because all the business activities will be unprofitable.”

He added that the economic crisis is highly unlikely to end in the near future.

“There is virtually no hope for a rapid recovery,” said economist Dmitry Golubovsky. “Such figures as the current 15 percent decrease of industrial output in China were typical for the Great Depression. This is a global crisis. The financial collapse, which everybody has been observing, is about to bring on severe consequences. For Russia, the situation will be even more difficult due to internal circumstances.”

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