New data suggests that the Russian economy is contracting, particularly its manufacturing and service sectors. Economic slowdown, though an expected consequence of the pandemic, has the potential to wreak long-term havoc on the economy if the government doesn't provide adequate stimulus measures.
The North Caucasus region of Ingushetia now has a "red" rating from the Finance Ministry, which means Moscow may take direct control over its debt management. Ingeshutia is approaching bankruptcy, with a debt of over 125% of its annual income. It was already one of the most subsidized regions in Russia, receiving over 80% of its annual budget from the central government. More regions are expected to approach bankruptcy in the near future as the pandemic drags on, but the Russian government remains reticent to stimulate the economy with its cash reserves stored in the National Wealth Fund. It is believed that these reserves are being saved to prepare for a Biden presidency which promises to be tough on Russia, both economically and politically.
This article discusses why Russia's new draft budget, meant to cover the next three years, does not include spending cuts. Russia, like most other countries, spent heavily during the coronavirus pandemic, creating a significant budget deficit. Yet the new budget, devoid of expected cuts that would've closed the deficit, presents an optimistic outlook on the Russian economy's recovery.
