Russian Inflation High Economic Contraction Heavy: Risk of a Major Economic Default?

Inflation and economic contraction are important issues for Russia to deal with and when not managed effectively could lead to a second collapse of the Russian economy in modern times (The first being the Soviet Union fall in 1991). Of course there are lots of different factors that lead to collapse but there is substantial growing risk that they will not be able to service their debts and maintain their economy and forces. You will want to read Elliot Smiths article Russia’s economy is beginning to crack as economists forecast sharp contractions that provides a perspective on the situation. From the article....

- S&P Global purchasing managers’ index (PMI) for Russia dropped from 48.6 in February to 44.1

-Capital Economics indicates that Russian economic contraction will be around 12% with 23% inflation.

Pay attention to the fall of the Soviet Union 1991 and how that created great volatility in their market. A second default could happen under certain circumstances of which would be international limiting of resources in a way that the Russian economic system cannot limp their way through. In other words it can't adapt because the operation was not well thought out and botched from the beginning based on an overestimation of internal resources and Russian military capacity (The risk of not having open dialogue about issues.) There are potential long term consequences (good and bad) of such a collapse but we should just be aware that such a thing could happen under different circumstances (Change in economic opportunities could be positive in the long run as they reconnect to the global economy likely under new leadership or it could be dangerous with different entities vying for power in an unstable way. i.e. oligarchs vs Putin. That is assuming that such a clash would cause a major break between proWest open and proEast closed ideologies who seek the aphrodisiac of government power. The inherent danger of surrounding yourself with loyal followers/nepotism that don't necessarily believe in the strategy. I'm just saying what might might occur. Maybe something else happens. What do you think? Its a hypothetical discussion/question done simply to think out of the box. May not have any merit whatsoever. )

source: tradingeconomics.com

source: tradingeconomics.com