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Friday, March 16, 2018

“What distinguishes the current crisis from the crisis of 1998”

The government increasingly began to compare the current situation in the country since the 1998 crisis. Some say that there is a threat of repetition then collapse, others don’t see that situation nothing to do. In similar crisis situations of different years and how much do they differ?

In the last two days various members of the government began to actively remember the crisis of 1998. Finance Minister Anton Siluanov said the day before, afraid of a repetition of the 90-ies. “Our task now is to bring the budget in line with the new realities, if we do, there will be the same as it was in 1998-1999, the population will pay through inflation for what we did in part bring the budget in line with the new realities”, – said the Minister, speaking at the Gaidar forum.

“Now the situation is reminiscent of Russian history 1998, at least a sharp drop in oil prices, which coincided with the Asian crisis”

The head of the government Dmitry Medvedev and the head of audit chamber Tatyana Golikova, on the contrary, believe that the current situation has nothing to do with the crisis.

According to Medvedev, in Russia now are not nearly there was in the economy in 1998, Russia has no right to yield to the sentiment of economic decadence and balance the level of growth was “plus minus zero”. “We are in a fundamentally different economic situation, which has nothing to do with 1998,” agreed Thursday Tatyana Golikova.

What is the similarities and the main differences between the current crisis from what it was in the 90s?

Oil rally

Overall, of course, is the fall in oil prices. “Now the situation is really reminiscent of Russian history 1998, at least a sharp drop in oil prices, which coincided with the Asian crisis and the accompanying downturn in the economy”, – says the newspaper VIEW senior analyst at GK Forex Club Alena Afanasyeva.

In early 1997, the oil cost in the region of $ 27 per barrel in August 1998 fell to $ 12, but already in the first quarter of 1999 was broken down, and oil prices went up and by the end of the year returned to pre-crisis values.

Last time the prices jumped considerably faster. The period of low oil prices lasted, in fact, less than a year and a half. This time the situation is fundamentally different. The decline began in mid-2014, winter 2015 lows have been broken in the past year for a while it seemed that the oil had found a low but stable level. It was understood that prices could stay low, but few expected that will begin a new round of falling and a care oil for 30.

The first difference is that low oil prices this time is not temporary but a long-term phenomenon. Second – there are a few turns of fall. One year oil goes to $ 90 (average value), the second year is $ 50, there is a risk that another year it may be around 40 dollars a year. Moreover, and in fourth year no one expects a sharp rise in oil prices, the most optimistic is a return to at least 50, 60 dollars. The sharp rise in oil prices, after the crisis of the 90s, which helped Russia how to pay off external debts and accumulate reserves, this time no one expects. In current conditions it is seen more as a miracle.

Macroeconomic stability


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