Western ‘Experts’ Predicted COVID-19 Would Lead to Russia’s Economic Collapse & ‘Topple’ Putin…They Were Wrong (Again)
The needless and idiotic lockdown was at least relatively brief so that Russia is on track for 'just' a 4% contraction, 2-3 times less than Western powers
A few months ago, US/UK media outlets and think tanks warned that the Covid-19 crisis meant Russia faced economic ruin. Now, as we enter the fall, it turns out Moscow is in a far better condition than most of its Western rivals.
Russia ‘experts’ in the English-speaking world love predicting the imminent downfall of the “Putin regime.” Whether it be the 2012 Bolotnaya protests, Western sanctions, the collapse in the oil price, or anything else, pundits are always on the lookout for indicators and warnings that Russia’s president and the system he governs are on the verge of breakdown.
It was hardly a surprise, therefore, that the arrival of the coronavirus provoked the commentariat into another round of doom-laden prognostications about Russia’s future. In particular, experts reckoned that the country’s fragile economy, already struggling to recover from its 2014 slump, was bound to suffer particularly badly, with negative political consequences for the Kremlin.
As spring turned into summer, newspapers told readers of Russia’s “dire economic situation” and “looming economic collapse.”“This is arguably the most serious challenge to Putin as national leader in the 20 years he has been in power, and he is failing it,” stated one of the Western media’s favoured commentators, Mark Galeotti.
Others agreed. Russia’s economic ‘meltdown’ had caused Putin’s popularity to “plummet,” headlines said, citing the latest data from polling company Levada, which showed Putin’s approval rating at near historic lows, albeit at levels which the average Western politician would die for.
‘Putin’s approval rating slides’; ‘Anger brewing’; ‘Public anger and defiance grows’, ran the headlines in the British press. Vladimir Putin “could be toppled by the coronavirus crisis,” said the Sun. Putin’s “lackluster response” to the Covid-19 crisis had “zeroed his political capital,” said Nikolai Petrov of the somewhat more academically respectable Chatham House think tank. And so on.
And yet, as so often, the doom mongering has turned out to be rather misplaced. On Monday, the newspaper Kommersant reported that the Russian Economy Ministry is now predicting that Russia’s GDP would fall by 3.8 percent in 2020, an improvement on previous estimates of five percent. This is, of course, only relatively good news. Another fall in GDP following the recessions of 2008 and 2014 is not what Russia needs. But it is not the economic “collapse” that so many pundits were forecasting.
Furthermore, compared with most Western countries, Russia’s economic performance during the Covid crisis doesn’t look too bad. Russian GDP fell by 8.5 percent in the second quarter of 2020. That compares to double digit percentage falls in most members of the European Union, 20 percent in the United Kingdom, 31.7 percent in the United States [that’s annualized, in quarterly terms it was around 9%], and a whopping 38.7 percent in Canada. As a consequence of Russia’s relatively light economic decline, it is now likely that Russia will overtake Germany this year as the world’s fifth largest economy, measured by purchasing power parity.
The pundits got the impact of Covid-19 wrong in part because of their faulty understanding of Russian government. Assessing the Russian situation at an early stage of the pandemic, another Chatham House expert, James Nixey, remarked that this would “challenge any competent government and Russia’s government could never be called competent.” But he was completely wrong. The tendency to define Russia as a “kleptocracy” is perhaps understandable given perceptions of the high rate of corruption there, but it obscures the fact that the Russian government is multi-faceted, and at least in part is perhaps better seen as a sort of bureaucratic “technocracy.”
Prime Minister Mikhail Mishustin is an example of a talented and effective technocrat, as too are many of those responsible for running the Russian economy, such as Central bank chief Elvira Nabiullina, several times winner of various business magazines’ “best central banker” awards. These people operate a decidedly imperfect system, but they are in many cases very competent bureaucrats.
If they have a fault, it has been what some people consider an excess of economic caution, which has led them to keep interest rates high and public expenditures relatively low, and to stockpile large sums of cash in the bank in expectation of bad times to come. This has led to criticism both in Russia and abroad that the government has been suppressing demand and dampening growth.
Now, though, the bad times have arrived, and the cautious approach has been shown to have had some advantages, as the government has been able to draw on its stockpiles to loosen the economic reins and cushion the effects of the Covid-induced [lockdown-induced] recession. This does not mean that a boom is around the corner. There is always the risk of a second Covid peak. And there are also reasons to believe that certain structural weakness in the Russian economy may inhibit rapid future development.
But for now, the worst has been avoided, and Russia is emerging from the virus crisis in good shape compared to many of its Western competitors.
As might be expected, Russia’s leaders are reaping the benefits. In the latest Levada poll, published last week, Putin’s popularity had rebounded to its pre-crisis level, as had that of his government, with Prime Minister Mishustin achieving his highest rating yet.
Economic collapse and the downfall of ‘the regime’ seem as far away as ever.