Russia’s Economic “Stagnation” In Global Perspective: Continued

It is now a staple of “common wisdom” to such an extent that there is little point in digging up specific news items. Bound up in red tape and crushed by the weight of state regulations, the argument goes, the Russian economy is doomed to years of renewed Brezhnevite stagnation – with the government increasing repressions and anti-Western rhetoric to divert attention away from its failure to raise living standards.

But is this actually a valid viewpoint? Russia’s rate of GDP growth has plummeted relative to 2010, when it was emerging out of a deep recession. In 2010 and 2011, it was typically at around 4% to 5%; by Q1 2013, it was just 1.6%.

russia-gdp-growth-to-2013

Now yes, that looks pretty bad – even though its far from being an outright recession (aka two consecutive quarters of negative growth, crudely defined). But one could credibly make the argument that a middle-income economy that still has much room for productivity increases, like Russia, should be growing considerably faster. But while that is true enough, it should nonetheless be pointed out that to the extent that Russia is in stagnation – so is the entire world, bar China.

global-gdp-growth-to-2013

See the similarities between the two graphs? Now imagine China were removed from the second one. In that case, they would virtually be mirrors of each other. Or how about simply comparing Russia’s growth rate to comparable CEE countries that are widely considered to be much “freer” and less corrupt:

russia-cee-gdp-growth-2010-2013-compared

The rather banal reality is that Russia is far from alone in experiencing a big slowdown among its middle-income peers: Especially in comparison to many of the Central-East European countries, some of which are in outright recession, but also fellow BRICS members Brazil and South Africa – not to mention Mexico, South Korea, Turkey, Argentina, and most other emerging markets – which have likewise seen slowdowns to the low single digits in the past few months or year.

As such, the question isn’t so much “Why is the Russian economy stagnating?” but more like “Why are pretty much all developed countries and emerging markets, except China, stagnating if not in outright recession?”

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