World Bank Group2015-04-242015-04-242015-04https://hdl.handle.net/10986/21781Russia's economy experienced two shocks in 2014. On top of the structural crisis that began in 2012, Russia had to deal with cyclical and idiosyncratic challenges to the economy. One of the new shocks illustrates Russia s integration into the world economy through its natural resource exports, and thus its dependence on the global commodity cycle: oil prices more than halved between July and December 2014, giving Russia a terms-of-trade shock. The ruble lost 46 percent of its value against the US dollar, which worsened already eroded business and consumer confidence. The monetary tightening in response made credit expensive, further dampening domestic demand. The other, more idiosyncratic, shock was related to the geopolitical tensions that began in March 2014 and led to economic sanctions. The tensions not only heightened perceptions that Russian investments had become riskier, they also dramatically increased the costs of external borrowing for Russian banks and firms. Spreads on Russian credit default swaps peaked in December at 578 basis points, compared to 159 a year ago. Together with the financial sanctions imposed on Russia in late July, which have restricted the access of Russia s largest state-connected banks and firms to Western international finance markets, this all but extinguished investment. The current World Bank baseline outlook, however, sees the national poverty rate increasing from 10.8 percent in 2013 to 14.2 percent in 2015 and 2016. Poverty is expected to increase because real disposable income and consumption will decline. This would be the first significant increase in poverty rates since the 1998-1999 crises. Russia weathered the 2008- 2009 crisis well as disposable incomes continued to grow slightly. Given the current limited fiscal space, additional support for the poor and vulnerable is likely to be less generous than it was during the 2008-2009 crisis. Although people at the bottom of the income distribution are the most vulnerable, there will be less opportunity for an increase in shared prosperity in 2015-2016, and there is a worrisome possibility that recent achievements might be reversed.en-USCC BY 3.0 IGOACCESS TO CAPITALAGGREGATE CONSUMPTIONASSET POSITIONSBAILOUTBALANCE OF PAYMENTSBALANCE SHEETSBANK DEPOSITSBANK LENDINGBANKING SECTORBANKING SECTOR STABILITYBANKING SYSTEMBASIS POINTSBONDBOND INDEXBOND ISSUANCEBOND ISSUEBONDSBORROWING COSTSBUDGET DEFICITBUFFERSCAPITAL ACCOUNTCAPITAL ADEQUACYCAPITAL FLOWSCAPITAL FORMATIONCAPITAL INFLOWSCAPITAL INVESTMENTCAPITAL MARKETSCAPITAL OUTFLOWCAPITAL OUTFLOWSCASH FLOWSCDSCENTRAL BANKCENTRAL BANKSCOMMODITY PRICESCONSOLIDATIONCONSUMER CONFIDENCECONSUMER CREDITCONSUMER DEMANDCONSUMER PRICE INDEXCREDIT DEFAULTCREDIT DEFAULT SWAPCREDIT DEFAULT SWAPSCREDITORSCURRENCYCURRENCY ADJUSTMENTCURRENCY CRISISCURRENCY DEPRECIATIONCURRENT ACCOUNTCURRENT ACCOUNT BALANCECURRENT ACCOUNT SURPLUSCYCLICAL FACTORSDEBT PAYMENTDEBT REPAYMENTDEBT SECURITIESDEBT SERVICINGDEBT SERVICING COSTSDEPOSITDEPOSIT INSURANCEDEPOSITSDEPRECIATIONSDEVALUATIONDEVALUATIONSDEVELOPING COUNTRIESDEVELOPING COUNTRYDISPOSABLE INCOMEDISPOSABLE INCOMESDOMESTIC DEMANDECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTSEMERGING ECONOMIESEMERGING MARKETEMERGING MARKET BONDEMERGING MARKETSEQUITY ISSUANCEEXCHANGE RATEEXCHANGE RATE DYNAMICSEXPENDITURESEXPORTERSEXTERNAL BORROWINGEXTERNAL DEBTEXTERNAL DEMANDEXTERNAL FINANCEEXTERNAL FINANCESEXTERNAL FINANCINGEXTERNAL FUNDINGEXTERNAL SHOCKEXTERNAL SHOCKSFEDERAL BUDGETFINANCIAL CRISISFINANCIAL FLOWSFINANCIAL STABILITYFINANCIAL SYSTEMFISCAL DEFICITFISCAL POLICYFIXED CAPITALFIXED INVESTMENTFLEXIBLE EXCHANGE RATEFLEXIBLE EXCHANGE RATE REGIMEFOREIGN CURRENCYFOREIGN CURRENCY LOANSFOREIGN DIRECT INVESTMENTFOREIGN EXCHANGEFOREIGN INVESTMENTFREE FLOATGEOPOLITICAL TENSIONGEOPOLITICAL TENSIONSGLOBAL ECONOMYGLOBAL TRADEGOVERNMENT BUDGETGOVERNMENT POLICYGOVERNMENT REVENUEGROSS CAPITAL FORMATIONGROSS DOMESTIC PRODUCTHIGH INFLATIONHIGH-INCOME COUNTRIESHOLDINGIMPORTIMPORT DEMANDIMPORTSINCOME GROWTHINDEBTEDNESSINFLATIONINFLATION RATEINFLATION TARGETINGINFLATIONARY EXPECTATIONSINFLATIONARY PRESSUREINSURANCEINTEREST RATEINTEREST RATESINTERNATIONAL BONDINTERNATIONAL BOND MARKETSINTERNATIONAL CAPITALINTERNATIONAL CAPITAL MARKETSINTERNATIONAL FINANCEINTERNATIONAL FINANCIAL MARKETSINTERNATIONAL MARKETSINTERNATIONAL RESERVESINTERNATIONAL TRADEINVENTORIESINVESTINGINVESTMENT ACTIVITIESINVESTMENT DEMANDINVESTMENT FUNDINVESTMENT GOODSINVESTMENT INCOMEINVESTMENT PROJECTSINVESTMENT RATESLABOR MARKETLABOR MARKETSLEVEL PLAYING FIELDLIQUID ASSETSLIQUIDITYLOCAL CURRENCYLOW-INCOME COUNTRIESMARKET SHAREMARKET VALUEMONETARY FUNDMONETARY POLICYMONEY SUPPLYMORTGAGEMORTGAGE LOANSNATURAL RESOURCENON-PERFORMING LOANNONPERFORMING LOANSNPLOIL DEMANDOIL EXPORTERSOIL EXPORTSOIL MARKETOIL PRICEOIL PRICESOIL SUPPLYOIL-EXPORTING COUNTRIESOVERDUE LOANSPENSIONPENSION FUNDPENSIONSPOLICY RESPONSESPORTFOLIOSPRIVATE BANKSPRIVATE INVESTMENTPRIVATE INVESTORSPROFIT MARGINSPUBLIC INVESTMENTPURCHASING POWERPURCHASING POWER PARITYREAL EFFECTIVE EXCHANGE RATEREAL WAGE GROWTHRECESSIONREGULATORY FORBEARANCERELATIVE PRICESREMITTANCEREMITTANCESREPOREPO FACILITIESRESERVERESERVE FUNDRESERVESRETURNRETURN ON ASSETSSLOWDOWNSOVEREIGN DEBTSOVEREIGN RATINGSPARE CAPACITYSTATE GUARANTEESSTOCK MARKETSTOCK MARKET PRICESSTOCKSSTRUCTURAL PROBLEMSSTRUCTURAL RIGIDITIESSUPPLY DISRUPTIONSTAXTOTAL DEBTTRADE BALANCETRADE DEFICITTRADE GROWTHTRADE RESTRICTIONSTRADE SHOCKTREASURYTREASURY BONDSUNCERTAINTYUNEMPLOYMENT RATEWORLD ECONOMYWORLD TRADEReportWorld Bank10.1596/21781