Russia’s leaders are warning the government will need to make more cutbacks if the nation is to avoid a repeat of the 1998 financial crash, the country’s biggest post-Soviet economic trauma.
The economy, which is heavily reliant on its massive oil and gas industry, is getting hammered by the plunge in global energy prices. State revenues are running dry and the cost of living is soaring for Russians as the currency drops.
Faced with the prospect of the economy languishing in recession in an election year, the government sought Wednesday to manage expectations.
“Our task is to bring the budget in line with new realities. If we don’t do that, then the same thing will happen as in 1998 and 1999, when the people pay through inflation for what we haven’t done,” finance minister Anton Siluanov was quoted as saying by state news agency Tass.
At the time, Russia devalued its currency and defaulted on its debts, events that caused inflation to jump to around 85 percent. Analysts say Russia’s situation is not as dire now, as it has very little debt. But its economic prospects grow darker as energy prices drop.
