The Financial Crisis Of Russia - 3538 Words

Russia was one of the countries that promptly reacted to the global financial crisis. The main effect of the crisis in Russia came in the beginning of 2009, and the Government started the realization of an unprecedented Anti-crisis program. Despite the fact that Russia had the largest fiscal stimulus in G20 countries, the outcome of the anti-crisis program was one of the least efficient. One of the reasons why the economic policy did not bring expected results was that the government bailed out corporations and banks basing the choice on political influence rather than on the efficiency considerations. The bailout strategy in Russia during the crisis will be compared to the government support of troubled companies in the United States in†¦show more content†¦The Russian Ruble experienced significant depreciation in the result of 30-40% decrease in oil, natural gas, and metal prices and a significant â€Å"deterioration in the private capital account† . Outflow of the capital from Russia demonstrated low confidence of investors. And as a consequence, the Russian financial market sharply went down. In 2009 Russian GDP fell by a record 7.9%, manufacturing - by 10.8%, unemployment rate increased from 6.3% in 2008 to 8.4% in 2009 , and the interest rates increased. People felt panic because of the memories about difficult times of the Russian default of 1998 . When the crisis hit the Russian economy in fall 2008 – beginning 2009, the Government realized the need for prompt measures. According to the Keynesian theory, the countercyclical fiscal policy, i.e. deficit spending, is one of the actions necessary to help the nation come out of the recession. The Russian Government announced the realization of the Anti-crisis program combining both monetary and fiscal policy actions. In particular, fiscal policy was supposed to create the market for business output, decrease unemployment, raise profitability, and increase business optimism. The Russian response to the crisis was considered â€Å"broadly in line† with programs implemented by many OECD countries. The fiscal policy actions in Russia involved increase of spending on the sectors