Bloomberg forecasts long period of stagnation in Russia

“For Russia’s battered economy, 2016 already looks miserable,” reads the article. “The ruble has slumped to record lows as oil prices have fallen 11% since Jan. 1, to around $30 a barrel.”

The author goes on claiming that “the government, which gets nearly half its revenue from oil and gas, is scrambling to plug a 1.5 trillion-ruble ($19.2 billion) hole in its budget.” “The International Monetary Fund forecasts the economy will shrink 1% this year, after contracting 3.7% in 2015,” the article says.

The situation has created “an atmosphere of extreme nervousness,” Economy Minister Alexei Ulyukayev told President Vladimir Putin in a meeting on Jan. 26, according to a transcript released by the Kremlin.

Economists and business leaders are warning that Russia faces long-term stagnation and declining competitiveness. "We lost the competition, ending up among of countries that are losing, "the downshifter states," said Sberbank of Russia’s CEO, German Gref, on Jan.15, UNIAN reported.

Vladislav Inozemtsev, a professor at the National Research University Higher School of Economics in Moscow, said: “It’s not about oil or sanctions; it’s about structural weakness.” There already were signs of malaise in 2012, when oil topped $100 and Western sanctions over Russia’s annexation of Crimea were two years off.

The trigger for the downturn, Inozemtsev says, was Putin’s return to the presidency in May 2012. He raised taxes on business and real estate to finance military spending and expanded the reach of inefficient state-controlled companies such as oil giant Rosneft.

Household incomes have declined for the past two years, and some 22 million Russians live in poverty, up 50% since 2013.

Putin, whose approval rating remains above 80%, has shown little interest in shaking up the country’s economic model.

The state-run companies that dominate the economy are headed by loyal Putin friends, while other members of his inner circle have benefited from big-ticket projects such as the Sochi Olympics that failed to produce lasting economic benefits, according to Yevgeny Gontmakher, a board member at Moscow’s Institute of Contemporary Development, whose chairman is Prime Minister Dmitry Medvedev.

Read alsoRussia seeks to save banks via individual deposits’ haircutGontmakher predicts Russia will probably eke out near-zero growth through 2017 and that the government will reassure citizens the economy will resume climbing after the March 2018 presidential elections. Instead, he says, the economy “will go downward after 2018.”