‘Putinomics’ and the Russian elections

President Vladimir Putin is on track to become Russia‘s longest-serving leader since Joseph Stalin.

As Putin seeks re-election in the upcoming vote, what is the state of Russia’s economy? And how will ordinary Russians fare if Putin stays in power?

There’s been a rise in living standards over Putin’s 18 years in office, and despite Western sanctions and volatile oil prices, Russia’s economy is still growing.

Timothy Ash, a senior emerging markets strategist at Bluebay Asset Management, says the last couple of years have been difficult but “it (Putin’s economic policies) has worked in some respects; it’s created financial stable exchange rates, inflation has dropped. The problem is … growth has been very weak and disappointing.”

“Fiscal and monetary policies have been too tight and too aggressive because of concerns about the geopolitical challenges facing Russia. Putin’s also held back from structural reforms – the Russian economy is in dire need of deep structural reforms – things like business environment, fighting corruption, demographic issues, so these things haven’t been addressed. It’s been a cautious micro and macro [economic] policy,” says Ash.

Russia faces a real demographic time bomb, it's a declining population over the longer term, Russia needs to find young dynamic people from somewhere.

by Timothy Ash, senior emerging markets strategist, Bluebay Asset Management

Ash says the real question is “whether or not Putin is interested in a more ambitious economic reform agenda … Russia is still an oil economy, and beyond agriculture, not much focus has brought diversification or investments. In the end, Russia is still struggling in terms of attracting foreign direct investments and that relates to the idea of the business environment: property rights, rule of law, the geopolitical relationship with the West. And if you’re a big motor manufacturing company, do you feel secure building physical assets in Russia at the moment when the relationship with the US and Europe is so difficult? Probably not.” 

While Putin has improved the living standards of ordinary Russians, “the last three to four years have been difficult because stagnation has been the order of the day,” says Ash. “While Putin himself is popular … if you look at ordinary Russians, they’re not very happy because stagnation doesn’t go down very well. There is job security, but living standards have taken a fairly significant hit and a lot of young liberal Russians are leaving … Russia needs those kinds of people to bring up productivity improvements and raise that growth potential of the Russian economy.”

“Russia faces a real demographic time bomb, it’s a declining population over the longer term, Russia needs to find young dynamic people from somewhere,” says Ash.

Also on this episode of Counting the Cost:

Saudi Aramco IPO: When Saudi Arabia said it was going to sell five percent of its state energy giant Saudi Aramco to public investors, top stock exchanges sat up and took notice. The flotation was tipped to happen this year, but now, Saudi Aramco says it needs to review its options for the listing. Paul Stevens, a Fellow at Chatham House, discusses transparency and foreign investment in Saudi Arabia.

Toys R Us: World-famous brand Toys R Us has announced it will sell or close hundreds of its stores in the US and at least 30,000 jobs will go. The 70-year-old retailer helped shape the toy industry for decades but has faced stiff competition in recent times from online businesses, as Gabriel Elizondo reports.

Zimbabwe economy: Zimbabwe‘s business community is calling for international sanctions to be removed to help improve the ailing economy. President Emmerson Mnangagwa wants to attract more foreign investors but many are cautious about doing business with Zimbabwe, as Haru Mutasa reports from Bulawayo.

Mexico fashion designs: Mexico is famous for its highly patterned, ornate, indigenous clothing, and the fashion world has taken notice. Major brands and designers have been selling clothing inspired by traditional Mexican designs. But the communities where those designs originate say they often do not see the benefits, as John Holman reports from Mexico City.