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Russia is less prepared to face a new crisis wave than it was back in 2008, expert calculations show. Economists voiced misgivings over the exuberant sentiment articulated by the Central Bank of Russia (CBR), according to which the country is on a sounder financial footing than it was four years ago. With data on hand, pundits forecast that the Reserve Fund would not last a year in the case of a downturn and the government would be unable to meet its social commitments.

The last two weeks have witnessed a barrage of negative reports on Greek political collapse, which could eventually lead to the country’s exit from the euro zone, as well as Moody’s rating downgrades of 16 Spanish banks. Global stock indexes have taken a pounding, and emerging markets have taken the hardest hit. Nevertheless, CBR’s Chairman Sergey Ignatiev downplayed fears of a looming double-dip recession, arguing that Russia was better prepared to face the crisis than in the run-up to the previous downturn.

In response to this claim, experts from the Development Center of the Higher School of Economics (HSE Development Center) compared the situation in Q1 2012 to the same period in 2008, showing that the economy is less stable than it used to be. Although the foreign debt landscape seems to have improved, and bank lending is driven by CBR’s resources and not deposits or foreign borrowings, as was the case in 2008, there is no reason to let down the guard, experts pointed out in a report entitled “New Crisis, State, Business.” In fact, capital outflow totaled $7bn in April and is expected to spill over into May. “In view of this situation CBR’s clichéd optimism looks all the more bizarre,” the report claims.

The economy’s dependency on the price of oil constitutes sufficient proof that Russia is far from being ready to face a new recession, experts noted. Even in case of a moderate downturn in the price of oil to $80 per barrel, the Reserve Fund would be used up in less than a year, while meeting all budgeted obligations is viewed as feasible only if oil prices climb $8-$9 per barrel a year.

Another matter of great concern is the growing share of budget payouts in household income and consumer demand. “Surging household borrowing volumes raises the issue of an overheated economy in respect to consumer optimism,” the HSE Development Center pointed out.

According to experts, the fact that the targets set by the government are beyond its reach only compounds the situation. “In order to deliver on its ambitious plans the state needs to raise colossal funds, but they can be raised only by improving the investment climate,” the report claims, referring to an upsurge in capital outflow, which is now comparable to the recession-dominated quarters of 2008 and 2009 and doubled compared to Q1 2008.

This pessimistic sentiment is shared by former finance minister Alexey Kudrin. " A recession is already underway in Europe, and recent developments in Greece imply that it will be deeper than before and could escalate into a new global crisis," Kudrin pointed out, arguing that the worst-case scenario of a deepening global crisis is the most probable one. According to RBC Daily, the authorities are also gearing up for a new crisis. By mid-August an interdepartmental council for financial stability is expected to be established.

“In 2008, the budget was balanced with the price of oil at $57.5 per barrel, but now the budget runs a deficit with oil at $120 per barrel,” Igor Nikolayev, director of the strategic analysis department at private auditing company FBK, said. Moreover, the government is saddled with overwhelming commitments and is unable to reduce 80% of the obligations it has undertaken, Finance Minister Anton Siluanov said earlier.

“The current situation has little in common with the pre-crisis period,” Dmitry Belousov from the Center for Macroeconomic Analysis and Short-Term Forecasts argued. “Since we have accumulated experience in dealing with the crisis and developed crisis management processes, we are better prepared for the crisis,” he said. In 2008, the Russian economy was overheated and, consequently, suffered a double whammy, Belousov went on to say, adding that now the economy is “underheated,” while the Arab Spring is expected to keep oil prices above $80 per barrel. “In the worst-case scenario, Russia’s economy will shrink 1.5%-2%,” the expert claimed.

Research department of RIA RosBusinessConsulting