Russia may have a wealthy elite of billionaire oligarchs but the country’s economic woes have pushed more than 3 million ordinary people below the poverty line.
The World Bank says 19.2 million from a population of 143.8 million now live in poverty – just over 13% of the population.
The reason, according to the report, is the country is in decline for two main reasons:
- The stranglehold of international sanctions following Russia’s annexation of The Crimea and continuing military action against The Ukraine
- A hit from falling oil prices – Russia is one of the world’s major producers and has seen revenues plunge on the international markets
The World Bank claims GDP has dropped by 10%, which has smashed consumer confidence as sanctions have deterred foreign investment.
Long road to recovery
“So far, the central bank’s flexible interest rate policy and willingness to devalue the rouble has supported the economy,” said World Bank economist Birgit Hansl.
“The impact of sanctions and the loss of oil revenues could have had a much stronger impact on the economy if the bank has been less accommodating.”
The World Bank report predicts the Russian economy will face a long recovery but recession is likely to continue for some months yet.
Forecasts show that the economy is likely to contract by 1.9% in 2016 before starting to grow again at 1.1% next year.
More people are expected to fall into poverty by the end of 2017, undoing all the economic progress the country has made since the global downturn in 2007.
Putin faces Panama Paper accusations
The figure is estimated to rise to 14.2% or more than 20 million people.
“What happens from now on depends on the decisions made by the Russians,” said Hansl.
“The room to make the right policy decisions is narrowing due to the current economic problems, but investors need to be encouraged and the government has to create a more even playing field for everyone to play a part in reviving the economy.”
Meanwhile, Russian premier Vladimir Putin has denied he has hidden offshore finances after the panama Papers revealed friends and close associates had funds worth $2 billion invested through shell companies set up by Panama lawyers Mossack Fonseca.
