The Cost of Putin’s Economic U-Turn
By Simon Kennedy and Henry Meyer Sep 29, 2014 2:09 AM ET
....
The Russian leader initially lived up to expectations as he reduced taxes and pushed entry into the World Trade Organization. Markets rallied and foreign investors poured in, driving the Micex Index (INDEXCF) of stocks up 12-fold in Putin’s first two terms, before the financial crisis hit in 2008. The ruble rose 12 percent in the same period.
Those days are now consigned to what might have been. Putin began turning away from his new friends as early as 2003, and accelerated the retreat as his third term in the Kremlin got under way in 2012. He cracked down on dissidents, curbed economic freedoms and, this year, fomented the rebellion in eastern Ukraine.
The result: Russia, now bordering on recession, suffers mounting international sanctions and, increasingly, is a pariah in capital markets. While the MSCI World Index of equities is up 9.7 percent from a year ago, the Micex is down 2.6 percent.
The ruble, hovering near a record low, has fallen 29 percent since Putin first became president.
‘Wasted Moment’
“There will be long-term damage to Russia,” Michael McFaul, until February U.S. ambassador to the country and now a professor at Stanford University in California, said in a telephone interview. “That’s a great wasted moment because Russia was on such a different trajectory. It’s just a tragedy for all that Putin went off in a different direction.”
For what could have been, look no further than the $2 trillion economy, which expanded an oil-powered average of about 7 percent from 2000 to 2008.
As Putin resumed the presidency in 2012, the International Monetary Fund was predicting growth of 3.9 percent in 2013. Instead it was 1.3 percent, an undershoot equivalent to about $50 billion. A similar shortfall is forecast for this year, according to Anders Aslund, a senior fellow at the Peterson Institute for International Economics in Washington, who advised Russia on privatization in the 1990s.
Even worse, Alexei Kudrin, who as finance minister from 2000 to 2011 helped return Russia’s budget to surplus, said Sept. 16 that his country will post zero or negative growth for the next two to three years.
more:
http://www.bloomberg.com/news/2014-09-29/the-cost-of-putin-s-economic-u-turn.html
DO SOMETHING!
| 
