Russia’s Great Depression

Понравилась презентация – покажи это...

Слайд 0

Russia’s Great Depression PLUNGING OIL PRICES are pushing Russia’s economy past the point of no return

Слайд 1

Russia is in deep trouble.

Слайд 2

So deep, in fact, that it could be headed for an economic depression.

Слайд 3

The source of its problems can be traced to the price of oil.

Слайд 4

Since the middle of last year, oil prices have dropped by a staggering 54%.

Слайд 5

Слайд 6

This trend follows OPEC’s attempt to bankrupt new, but more expensive, sources of oil in the U.S. and elsewhere.

Слайд 7

But Russia has been hurt more than most because a huge portion of its economy relies on energy exports.

Слайд 8

In 2013, for instance, Russian exports totaled $526 billion.

Слайд 9

$305 billion of which related to oil and other types of fuel.

Слайд 10

Слайд 11

For Russia to avoid economic contraction, oil must stay above $90 a barrel.

Слайд 12

Thus, not surprisingly, the plunge in prices is having a brutal impact on Russia’s economy.

Слайд 13

Most critically, the value of its currency, the Ruble, has tumbled.

Слайд 14

At the beginning of 2014, 34 rubles bought one U.S. dollar.

Слайд 15

Today it takes 58 rubles!

Слайд 16

Слайд 17

As a result, import prices have effectively doubled.

Слайд 18

And if Russia can’t import products at reasonable prices, then its standard of living will drop precipitously.

Слайд 19

One commentator is even predicting that Russia’s GDP could fall by as much as 10% this year!

Слайд 20

By comparison, U.S. GDP fell only 2.8% in the worst year of the financial crisis.

Слайд 21

But perhaps most troublesome is the impact on Russia’s banks.

Слайд 22

To slow the sale of rubles, Russia’s Central Bank hiked its benchmark interest rate from 10% all the way up to 17%.

Слайд 23

Слайд 24

The move, which inversely impacts bond prices and bank profitability, triggered the failure of Trust Bank, a mid-sized lender based in Moscow.

Слайд 25

This may not seem like a big deal, but we’ve learned over the years that one bank failure often begets others.

Слайд 26

As Walter Bagehot wrote in his seminal treatise on banking: "In wild periods of alarm, one failure makes many.”

Слайд 27

The question, in turn, is whether or not Russia can maneuver around these pitfalls.

Слайд 28

If it can, then it may be able to avoid a deep depression.

Слайд 29

But if it can’t, then we may soon be witness to the first Great Depression of the 21st century.

Слайд 30