World Economy

Russia Says Will Weather Financial Crisis

Russia Says Will Weather Financial Crisis
Russia Says Will Weather Financial Crisis

Russia would weather any potential financial crisis better than some other countries, the country’s deputy finance minister indicated on Tuesday.

“The problems are already behind us. We’ve experienced huge shocks but if we imagine another crisis like a global financial crisis, Russia will in that case suffer less because we already made huge adjustment to a much harsher reality in the past couple of years,” Maxim Oreshkin told CNBC on the sidelines of the World Economic Forum in Tianjin.

Oreshkin’s comments came close on the heels of a referendum in the UK last week in which voters opted to leave the EU. The outcome rocked global financial markets, sparking concerns that the turmoil would spill over to emerging markets.

The US and the European Union introduced sanctions against Russian companies and individuals with links to Moscow after Russia’s annexation of Crimea in 2014, the same year energy prices started their extended decline.

Oreshkin said the country had managed to adjust to these previous shocks and was doing “pretty well” financially with budget deficit at 3% of gross domestic product in 2016 and government debt just below 15% of GDP.

“For Russia, sanctions were playing a crucial role in 2014 and early 2015 but now it’s not that important. We get used to this new situation,” he said.

His comments came after Russia and China signed off on a raft of energy deals during President Vladimir Putin’s visit to Beijing on Saturday.

As Russia’s government counts the months to an economic rebound, a bellwether of investment is nearing levels of distress last seen during the throes of a recession seven years ago, Bloomberg reported.

The value of construction works plunged 9% from a year earlier in May, the worst showing since October, even as industrial production grew for a second month and consumer indicators from real wages to unemployment improved. A gauge of business confidence in construction dropped to minus 19 last quarter, only two points above the trough reached in 2009, according to a report by an institute at the Higher School of Economics in Moscow.

“The recession we are seeing in construction is significantly more painful than in other main industries of the economy,” said Georgy Ostapkovich, head of the Institute for Statistical Studies and Economics of Knowledge that conducted the study based on Federal Statistics Service data.