As leaders around the globe compete with ever-bigger spending packages, the Kremlin is hoarding hundreds of billions of dollars in reserves, worried that oil prices will stay low for a long time. Russia has more than $550 billion stashed away, including a rainy-day fund worth $165 billion, but ING Bank estimates President Vladimir Putin’s support measures so far amount to only about 2% of gross domestic product.
During the 2008-2009 global financial crisis, the country spent a tenth of GDP to counter the collapse but was able to rebuild its reserves within just a few years as crude rebounded. This time around the Kremlin is hunkering down for a prolonged period of low export revenues. “Oil prices have fallen below a level anyone thought imaginable,” said Alexandra Suslina, a budget specialist at the Economic Expert Group, a Moscow think-tank that advises the government. “They need to spend the reserves carefully because that’s all there is.”
The approach has caused outrage among business owners and lobby groups, who warn that insufficient stimulus could lead to mass unemployment, bankruptcies and a deep economic slump. The central bank estimated that a government order for most Russians to work from home for the whole of April could knock 1.5% to 2% off growth this year, while the budget is being re-written to prepare for oil prices at $20 a barrel.
“So far there are promises but no help, I don’t know even one businessman who received help and almost everyone has suffered,” said Aleksandr Khurudzhi, head of the Business Protection Association in Moscow.