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All news / Russia Under Threat if U.S.-China Trade War Escalates, Experts Warn

  • 21 Aug 2019, 10:26

The US-China trade war, if escalated, could lead to economic slowdown and even recession in Russia, analysts by the Moscow Higher School of Economics’ SE Centre for Business Tendency Studies (CBTS) said in a report, according to TASS.

“If the trade conflict between the world’s two biggest economies, the US and China (roughly 35% of world-wide nominal GDP, Russia – about 2%), hits the ceiling and, consequently, growth rates of the economies of mentioned countries all but certain slow down for some period, that will immediately result in a notable decline in global commodity prices and create major difficulties for the main Russian export,” the analysts said in the report, titled “Business activity of Russian manufacturing in June-July 2019.”

According to the research, the share of fuel and energy goods, metals and timber roughly equaled 80% in Russia’s total export volume in January-May 2019.

“Naturally, the start of such a mechanism will ensure certain problems for the Russian budget, negative volatility on the forex market, deterioration of the inflationary component, probably resulting in an economic slowdown and even recession,” the document’s authors noted.

However, as of now, experts see no serious macroeconomic, geopolitical and price-related challenges facing Russia’s mining industry.

In 2020-2021, 12 years will pass since the latest global financial and economic crisis of 2008-2009, the HSE’s research said.

“The economic theory holds that this period (Juglar cycles) is considered a medium cyclical wave, after which it is necessary to make a major capital investment for raising the utilization level of aging capacities and partial change of the technological setup. Such reformation usually results in a temporary recession,” experts said.

They believe the ongoing decline of the Investor Confidence Index in a number of developed economies is an indirect sign of the start of such an economic phenomenon.

“Certainly, if the world’s top ten countries in terms of nominal GDP enter into the state of economic recession, and even worse – in financial and economic crisis, that will inevitably affect the Russian economy. We all perfectly remember Russia’s ‘global scale’ of the previous crisis (Russia’s GDP dropped 7.8% in 2009, falling the most among G20 countries),” the research said.