Bad but Stable

Abstract

Russia's fiscal system was destabilized in 2015 because of the fall in national oil revenues. The budget crisis resulted in a sustained fall in personal income, which in turn led to a fall in consumption. This in turn resulted in a decline in trade and investment. These trends were present in the majority of Russia's regions. Russia's industrial slump, on the other hand, was relatively small and did not last long, in large part due to continued investment and growth in the defense industry. The sustained industrial production, combined with the buffer of a substantial pool of foreign migrant labor, allowed for stable employment figures. Overall, the Russian economy was better able to adapt to the deterioration in conditions than most expected.

Notes

English translation © 2016 Taylor & Francis Group, LLC, from the Russian text “Stabil'no plokho: chto derzhit na plavu rossiiskie regiony?” Published with the author's permission. Natalia Zubarevich is director of the regional program at the Independent Institute of Social Policy. Translated by Stephen D. Shenfield.