FX Alerts

Russia’s slow road to ruin

05/03/12 @ 11:09 GMT by Simon Smith, Chief Economist

Of course, it was no surprise that Putin was re-elected as President of Russia over the weekend. But in the bigger picture, it’s a development that will further challenge Russia’s standing in the global economy. Already, Russia’s relatively poor performance poses a question mark over retention of its place within the BRIC ‘bloc’ (Brazil, Russia, India and China) given that it has failed to keep up with its major emerging market counterparts on most measures.

Whilst China and India (to a lesser extent) have played major roles in keeping the global economy moving in recent years, the Russian economy virtually stood still during a time that China has grown 32% in real terms (2008 to 2011). But this hasn’t drastically impacted on the currency, the ruble still holding up well vs. Eastern European currencies. Most of this is owing to the strong performance of the oil price, together with Eastern Europe’s exposure to the eurozone crisis.

But there have been more protests this time around and now Putin has a new six-year mandate. When Putin came to power in 2000, life expectancy in Russia was below the global average and has yet to close the gap. Other data reflects a similar picture of Russians being left behind and, as the world has shown over the past year, populations are increasingly inclined to vent their frustrations. Russia risks embarking down a road to ruin from which it will struggle to recover and the currency’s reliance on the oil price as a driver of value is, and may well continue, to fall.

Tags: oilrub

Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. FxPro does not take into account your personal investment objectives or financial situation. FxPro makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any employee of FxPro, a third party or otherwise. This material has not been prepared in accordance with legal requirements promoting the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of FxPro. This communication must not be reproduced or further distributed without the prior permission of FxPro.

élő chat