Vladimir Putin is about to send Russia to a recession and it may mean trouble for Russia’s neighbors.
The Russian president, who has led his country into a civil war in Ukraine to back pro-Moscow rebels, had brought on a stiff round of economic sanctions that have ground the economy to a halt. Combined with a plunge in the price of oil exports, the situation has Russia facing a recession in the coming year.
On Tuesday, Russia’s economic development ministry revised its GDP forecast for 2015, decreasing it from a growth of 1.2 percent to a drop of 0.8 percent. The ministry also changed its forecast for disposable income, predicting a drop of 2.8 percent.
The dropping oil prices are one of Russia’s biggest challenges, experts say.
“The real damage from the collapsing ruble and oil price is to investment and growth,” said Chris Weafer, senior partner at Moscow-based Macro-Advisory, said in a note to investors.
“Russia is a non-investible country for all but the bravest of hedge fund investors right now, and will remain in this category until both the ruble and oil stabilize at minimum.”
But Vladimir Putin is also taking much of the blame for the anticipated Russian recession. It was his ultra-aggressive stance that led Russia into Ukraine to annex the Crimea region and support rebels, bringing on Western sanctions.
While some believe the upcoming recession may soften Putin’s aggression, others believe it will make him even more aggressive with Russia’s neighbors.
“It is a completely new reality for him,” Sergei M. Guriev, a prominent economist who fled into exile last year, said of Mr. Putin. “Whenever Russia wanted the oil price to go up, it has gone up. He has always been lucky, and this time he is not lucky.”
Vladimir Putin has already raised tensions in the region with Russia’s military maneuvers. Russian warplanes and fighter jets have conducted dozens of exercises in neighboring airspace to test NATO defenses, and Russia has also been flexing its nuclear weapon muscles by shifting warheads and making veiled threats against neighboring countries.