The continued dominance of the ruling United Russia party was confirmed yet again at regional and local elections held on September 8. The opposition made a strong enough showing in major cities to suggest that President Vladimir Putin and his allies cannot take victory for granted in urban areas, but elsewhere, United Russia’s position appears to be pretty much unassailable.

The strong showing by United Russia is less a testament to the party’s popularity than to the effectiveness with which Putin has employed the administrative, security and judicial resources at his disposal to undermine his opponents. That said, turnout of just 25 -30 percent across the country, compared to historical participation rates closer to 50 percent, is indicative of public dissatisfaction with both the incumbents and the available alternatives.

In late June, President Putin overhauled the government’s economic policy team. The key moves appear to be aimed at bolstering the authority of loyal insiders, rather than signaling plans for any significant change in policy direction.

In The Spotlight

The reshuffle was carried out amid a sharp deceleration of the economy that has generated significant political buzz in Moscow. Real GDP growth is forecast to slow to less than 2 percent this year, but Putin has deflected calls for the central bank to adopt a pro-growth posture.

Indeed, Elvira Nabiullina, the new governor of the central bank, has confirmed plans to switch to an inflation-targeting mandate by 2016. Likewise, the three-year budget plan approved by the Cabinet is September is arguably the most conservative spending program of the Putin era.  

Both the IMF and Russia’s Finance Ministry have argued that the economy is operating at close to full capacity, and, as such, any stimulus would be more likely to fuel inflation than boost growth. Many Russians remember only too well the damage caused by runaway inflation in the 1990s, and officials are no doubt wagering that the population will be more tolerant of slower growth than it would be of high inflation.

Instead of relying on fiscal and monetary stimulus, the government will depend on state-run corporations.

Instead of relying on fiscal and monetary stimulus, the government will depend on state-run corporations—particularly those in the energy sector—to prop up the budget and the broader economy. Limited privatization, higher taxes, and increased dividend payouts are all being considered as ways to increase cash flow to the government coffers.

On the international front, the government’s concern over sluggish economic growth and the disappointing performance of Russian industry in general suggests that Moscow will not be inclined to retreat from protectionist trade measures that have contributed to tensions with the EU, notwithstanding the threat of a WTO ruling in the EU’s favor.

Likewise, it is unlikely that Russia’s key role in a brokering Syria’s agreement to surrender its stockpile of chemical weapons heralds a period of constructive engagement between Russia and the west. Moscow continues to ally itself with a pariah regime in Damascus, and shows no sign of withdrawing its support for Syria’s embattled regime, which poses a significant obstacle to a negotiated resolution of that country’s civil war.


The PRS Group
About The Author The PRS Group
The PRS Group is a leading global provider of political and country risk analysis and forecasts, covering 140 countries. Based on proprietary, quantitative risk models, the firm's clientele includes financial institutions, multilateral agencies, and trans-national firms.

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