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Russia’s economy has avoided collapse so far, but trouble is looming. Here’s why – Global News



Russia’s economy has averted a devastating collapse so far despite unprecedented sanctions sparked by the war in Ukraine, allowing Vladimir Putin to rally his people against the West and in support of his invasion.

Yet experts — and even top Russian officials — say trouble is right around the corner. Reserves that have propped up the economy to this point are starting to run out, and Moscow’s mayor is warning of mass job losses. The head of Russia’s central bank said this week that the impacts of existing and future sanctions are about to be felt in “the real economy” soon.

“It’s largely an artificial propping up of the economy that’s taken place” up to this point, said Lisa Sundstrom, a political science professor at the University of British Columbia who studies Russia.

“The question now is, how long can this continue?”

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War in Ukraine: West criticized for putting business losses over human lives

War in Ukraine: West criticized for putting business losses over human lives – Apr 6, 2022

Why is Russia’s economy surviving?

After Western nations announced their first rounds of economic sanctions in the days after Russia invaded Ukraine on Feb. 24, the Russian ruble lost nearly half its value and stock markets were closed for the first month of the war to avoid a crash.

Two months later, the ruble has largely recovered, becoming the best-performing currency globally in March. Trading also bounced back once the stock markets were reopened last month.

Economists say steps taken by the Kremlin and the Russian Central Bank — raising interest rates to 20 per cent, forcing Russian businesses to exchange 80 per cent of their overseas earnings into rubles — contributed to the recovery.

Russia has also dipped into the half of its estimated $620 billion in foreign currency holdings not invested in the U.S. and Europe — currently frozen by Western sanctions — to protect the ruble and fuel government spending.

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Russia is also continuing to export oil and other energy products to India, China and Europe, bringing billions of dollars into the economy every month.

Freezes on Russian imports and exports by the West have led international financial organizations to predict Russia’s GDP will shrink between 10 and 15 per cent by the fall — a dip that University of British Columbia economist James Brander calls “a serious recession, but not a catastrophe.”

“The Russian economy is being harmed, but it’s not at a level where it affects the war effort,” he told Global News.

“For most people, it’s an inconvenience. And for Putin, I don’t think it’s a problem at all at this stage, and I don’t think he actually cares that much.”

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Putin says possible nationalization of Russian assets abroad is ‘a double-edged weapon’

Putin says possible nationalization of Russian assets abroad is ‘a double-edged weapon’ – Apr 5, 2022

Putin spins recovery as victory

On Monday, Putin told a televised meeting with senior officials that the West’s hope of an economic collapse has failed, echoing similar comments he has made in public this month.

He said the widespread sanctions aimed to “rapidly undermine the financial and economic situation in our country, provoke panic in the markets, the collapse of the banking system and a large-scale shortage of goods in stores.

“But we can already confidently say that this policy toward Russia has failed,” he continued. “The strategy of an economic blitzkrieg has failed.”

After widespread protests at the start of the war, domestic support for Putin appears to have risen. The latest poll by the Levada Center, an independent pollster in Moscow, suggests 83 per cent of Russians approve of the leader, up from 69 per cent in January.

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The Kremlin has introduced severe penalties for protests and any media reports that deviate from the Kremlin’s description of the invasion as a “special military operation.” That, and state media’s attacks on the West, appear to have made an impact, according to Levada.

“The confrontation with the West has consolidated people,” Denis Volkov, the pollster’s director, told the New York Times when the poll was released on March 31. He added some of the respondents in favour of Putin said they normally did not support the president, but had decided now is the time to do so.

Sundstrom says even independent polling in Russia is not always accurate, as it does not measure why people respond the way they do — suggesting fear of speaking out against Putin may be playing a role.

But she adds that because the government has done enough to keep the economy “at an acceptable level” for the average Russian, it has allowed Putin to benefit from a “rally around the flag” mentality that often lifts the popularity of wartime leaders.

“I think the consensus out there is that a lot of the popularity is real,” she said.

“At the same time, if you think that everybody around you likes the leader, then you will like the leader yourself. You kind of think that it’s the right thing to do.”

Click to play video: 'Sanctions further isolate Russia, crush its economy'

Sanctions further isolate Russia, crush its economy

Sanctions further isolate Russia, crush its economy – Mar 10, 2022

Trouble ahead

Sundstrom says Putin’s popularity could drop off “pretty quickly” if domestic discord grows — particularly if the economic situation worsens.

Moscow Mayor Sergei Sobyanin warned on Monday that around 200,000 people are at risk of losing their jobs as Western companies pull out of the capital in protest over the war. He announced $40 million will be spent on helping those workers laid off by foreign firms find temporary employment and new jobs.

The Russian Central Bank’s chairwoman, Elvira Nabiullina, sounded even more dire in her reports to Russian lawmakers this week.

Inflation in Russia now stands at 17.6 per cent and is on track to accelerate to 22 per cent this year, while the economy is set to shrink by 9.2 per cent in 2022, according to a poll of economists conducted by the bank in April.

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Sanctions over Ukraine are starting to ‘shrink’ Russia’s economy. Here’s how

Nabiullina told the Duma, Russia’s lower house of parliament, on Thursday that nearly every product made in Russia relies on parts imported from overseas, which have largely been banned amid the sanctions. Bans on Russian exports are also due to be felt as soon as the second quarter of this year, she added.

Plus, she warned that “the period during which the economy can live on reserves is finite.” She explained the reserves not frozen by the West are largely invested in gold and Chinese yuan, which can do little to further resuscitate the ruble.

Brander, the UBC economist, said it will take years for Russia’s manufacturing sector to find ways to make up for the lack of Western parts and create new supply chains.

“As time goes on, it’s going to be harder and harder to produce in Russia,” he said.

“My only worry is that (the economic pain) won’t accumulate fast enough,” he added, pointing to how little impact such shortages will have on the Ukrainian battlefield right now.

Click to play video: 'Russia-Ukraine conflict: Sanctions pummel Russian economy'

Russia-Ukraine conflict: Sanctions pummel Russian economy

Russia-Ukraine conflict: Sanctions pummel Russian economy – Feb 28, 2022

The European Union, meanwhile, is mulling how to curb imports of Russian oil, seeking a phased approach in line with the four-month transition away from Russian coal the bloc announced earlier this month.

If approved, it would strike a blow to a revenue stream for Russia currently estimated at over $800 million per day, according to the Belgian economic institute Bruegel.

Sundstrom says the accumulation of these looming catastrophes may very well lead to real impacts on average Russians, threatening Putin’s support.

“At a certain point, the rubber is going to hit the road when the government finds itself unable to pay people’s pensions, provide parts for manufacturing, all these things that Russians rely on day-to-day,” she said.

“What happens after that, we really don’t know at this point.”

— with files from Reuters

© 2022 Global News, a division of Corus Entertainment Inc.

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IDB Sees Latin America's Moment to Shine: New Economy Update – BNN



(Bloomberg) — With supply chains and the war in Ukraine disrupting trade and investments globally, Latin America and the Caribbean have an opportunity to shine, the head of the Inter-American Development Bank Mauricio Claver-Carone said. 

He spoke on the sidelines of Bloomberg’s inaugural New Economy Gateway Latin America event in Panama City that kicks off Wednesday with speakers discussing the post-pandemic economic growth challenge, preparing for the next public health crisis, the transition to green energy and the case for cryptocurrencies in the region, among other topics. 

“I don’t want a single company to look at China before it looks at any country in Latam and the Caribbean,” Claver-Carone said.

The supply chain disruptions have cast a light on the issue of near-shoring, or placing manufacturing facilities closer to US consumers, with many Latin American countries lobbying for those investments.

You can follow the agenda here and the event will be streamed on the terminal at LIVE GO and on the web.

©2022 Bloomberg L.P.

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'Full-blown war' of housing NIMBYism threatens Canada's economy: CAPREIT CEO – BNN



The head of one of the nation’s largest residential landlords is warning Canada can ill afford a “full-blown war” on higher density housing projects led by single-family home owners intent on opposing those developments.

Canadian Apartment Properties Real Estate Investment Trust (CAPREIT) chief executive officer Mark Kenney said widespread pushback against higher density supply only serves to raise asset prices, and could have a dire impact on immigration levels and by extension long-term economic growth.

“Canada has had affordable housing for decades upon decades upon decades. It’s only in the last, I’ll say 10 years that affordability has started emerging as a really serious problem. But we can’t have immigration – responsible immigration – without responsible housing policy,” he said in an interview Tuesday.

“The reality is that if we want to have these ambitions, we have to have a different housing policy. It can’t be a full-blown war against housing when we really need people coming to our country to help build our economy.”

While home ownership affordability pressures have eased slightly – average prices in Toronto fell 6.4 per cent month-over-month in April to $1,202,819 – CAPREIT has seen some of the heat seep into the rental market.

In its most recent quarter, CAPREIT’s monthly rental prices rose 10.2 per cent at units where there was tenant turnover.

Kenney said his company and the REIT sector at large are ready and willing to step in to help address supply constraints, but said the industry has been stymied by zoning rules, which are under the purview of municipalities.

“We’re very much in the acquisition of new construction apartment buildings now. CAPREIT has been building up its zoning, we have over 10 thousand units of market-viable land. It takes so long to zone this land,” he said.

“The apartment REITs are a big part of the supply solution for Canada. The apartment REITs are definitely a big part of the supply solution for Canada. We’re capitalized properly, we have the experience and we have the land.”

Kenney also pointed to modular housing as a potential solution for Canada, which badly lags the United States in adoption of that form of housing.

“This is one of the most affordable forms of home ownership there is out there. The U.S. has a very large segment of manufactured homes – close to 17 per cent of people in the U.S. live in one, versus less than one per cent in Canada – so we have an affordable home ownership solution sitting right in front of us, it’s a matter of getting zoning to allow these homes to be put in,” he said.

Kenney said part of the challenge is the stigmatization of modular homes, with perceptions they’re no different from the mobile homes of years past.

“The reality is that the quality of these homes are better than homes that are built in subdivisions, because they’re built in a controlled environment,” he said, adding they have “high, high energy efficiency — they’re probably the most eco-friendly form of housing you can buy.

“Terrible stigmatization, but the reality and the opportunity out there for Canada, we’re trying our hardest to get the messaging across. It’s a big part of the answer – not for big cities, but definitely in the rural areas.”

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CFL collective bargaining scuffle impacting Regina economy – Global News



As the Canadian Football League (CFL) and the CFL Player’s Association continue to negotiate a new collective bargaining agreement, the start of the season hangs in the balance.

With players striking until a new deal is reached, fans and local businesses are keeping a watchful eye on the situation with games potentially getting cancelled.

“You can feel the energy in the city when the Riders are playing. It’s infectious, it’s exciting and to think that we might not get that experience in the same sense as we have in the past, it’s disappointing,” said Tyler Burton, assistant general manager at Regina’s Cathedral Social Hall.

That infectious energy on a Rider game day translates to dollars for local businesses which are now waiting in limbo on whether or not Monday’s preseason contest between Saskatchewan and Winnipeg at Mosaic Stadium will even be played.

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“Rider games are often the biggest show in town. They give a much-needed boost to our tourism and hospitality sector anytime we can host a game in Regina so we are anticipating a busy weekend with the upcoming game,” said Chelsea Galloway, Chief Tourism and Visitor Growth Officer for Economic Development Regina.

“We are really excited to have that in town and our restaurants, our hotels, and airport are all ready to welcome people back.”

Click to play video: 'CFL season once again on hold as CBA looms'

CFL season once again on hold as CBA looms

CFL season once again on hold as CBA looms

The potential cancellation of Monday’s pre-season game — not to mention possible further cancellations depending on how long the work stoppage lasts — affects the entire economy. This is especially critical in markets like Saskatchewan where CFL game days provide a major financial boost.

“You see it all over our city, but I think definitely in our restaurants and our hotels it’s those last minute cancellations, business that they’re anticipating. They get that schedule, they see those games, they’re trying to staff up, they’re building budgets around that so our entire hospitality sector gets impacted by things like this,” said Galloway.

“Rider events are the games that we plan forward to months in advance. We make sure the staff can’t book off the days just because we know we are going to get slammed pre-game and post-game. It’s huge for us; we look forward to it every year.

“Last year obviously was a little different with COVID but this year was supposed to be the first normal year back so it’s tough to know that we might be losing some of those games, if not all of them. The numbers don’t lie, they are some of our busiest days of the year.”

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Even vendors at Mosaic Stadium like Fresh Carnival are stuck managing 40 staff members and preparing perishable food items for an event that may or may not happen this coming long weekend.

“We do plan as far ahead as possible for that so we do have all this extra product coming in which is already hard enough to find these days with all the other factors out there in the world,” said Burton.

“But for us to plan so far ahead and then to have it just not happen last minute it makes you stand back a bit and shows how volatile the industry can be and how all the little events around a city like Regina make such a big difference.”

But the biggest boost for Regina’s economy will come in November when the city hosts the Grey Cup and its accompanying festival.

“The Grey Cup is very significant. We’ve hosted it three times in Regina in the past. This time we actually have 10 more hotels, over 1,000 new rooms, so it’s big. We’re projecting a sellout at this point so it’s a massive event for our city,” said Galloway.

After two tough pandemic years, businesses are hoping for a quick solution to the latest collective bargaining situation.

“The timing couldn’t be worse, obviously, and that goes without saying. I mean, after coming out of COVID and after going through a year that’s kind of week-by-week where we don’t know what to expect, to see the finish line or whatever that may be and think, ‘Oh we have this first Rider pre-season game coming up’ and everyone is talking about it and then all of a sudden for it to be pulled out from under our feet, it’s disappointing,” said Burton.

Click to play video: 'Focus Saskatchewan: CFL Struggles'

Focus Saskatchewan: CFL Struggles

Focus Saskatchewan: CFL Struggles – May 7, 2022

© 2022 Global News, a division of Corus Entertainment Inc.

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