Analyzing the Volatility of the Russian Economy

Don Pittis talks about the Russian economy in terms of its periodic dwindling performance, whereas Russia’s decade of outperformance was possible in part because the preceding collapse after the demise of communism was so extreme. This has left ample spare capacity to be brought back into use. It now applies modern technologies and managerial techniques provided further scope for a sustained burst of rapid catch-up growth. Although the falling rouble contributed to the recent rise to 6.9% in March which is a more fundamental reason why inflation remains a problem is that the economy is operating at full capacity. Even the labour market is tight and the unemployment rate is just 5.4%. Moreover, the budget deficit was 1.3% of GDP last year,

In the near past, China exported 94 million metric tons of steel, more than the total output of the U.S., India and South Korea, the world’s third, fourth and fifth largest producers. Moreover, UBS analysts have estimated the world has excess steel-production capacity of 553 million metric tons a year, which is much of it in China. [3]

However, The cuts target other sectors experiencing oversupply, too, such as cement and shipbuilding. China’s so-called “zombie” enterprises, also its prime target, are state-owned companies that are no longer producing, but keep employees on the books to avoid an unemployment crisis whereas State-owned enterprises currently account for around 37 million workers and 40% of China’s industrial output. It is increasingly clear that the economy can no longer afford to carry industries that don’t produce with growth projected to slow to around 6.5% a year and possibly even

A consulting firm, Rhodium Group calculates that global steel production rose by 57% in the decade to 2014, with Chinese mills making up 91% of this increase.[7]

While Explaining the Feedback loop, the author brings China back into discussion has based its dynamism on a precarious feedback loop. High spending on investment drives up the growth rate but investment is only sustainable if the resulting productive capacity finds willing consumers. In the past, China could invest on the theory that excess output could be exported, but that game has neared its limits. In the future, most of the consuming must be done by Chinese households.[8]

The Author claims Feedback loop to be economic rebirth for Canada. Recent numbers from Statistics Canada show that exports to the U.S. dropped by 0.3 per cent in May to $32 billion, while imports from the U.S. grew by 0.5 per cent to $30 billion, contributing to a $3.34-billion trade deficit for the month, and putting Canada on track to post a record trade deficit in the second