AUDIO

While economies all over the globe are facing tough times, Russia's symptoms appear to be particularly acute. The current financial crisis closed the Russian stock exchange on multiple occasions, and Russia's stock market plummeted to one-third of its value in June. The price of oil, Russia's prime export commodity and the primary source of state revenue, is down almost two-thirds. Inflation hit nearly 12 percent in October and may reach as much as 15 percent for the year, as the ruble has declined by 14 percent against the dollar since July. Following the August conflict with Georgia, Russia saw the withdrawal of nearly $25 billion worth of foreign investment, and the World Bank estimates that the total net capital flight will reach $50 billion this year. The real estate "bubble" that made Moscow the world's most expensive city is beginning to burst. Foreign exchange reserves are down by almost 10 percent and continue to melt as the government tries to bail out major companies, inject liquidity in the banking system, and support the ruble. At an estimated 13 percent of the country's GDP, the bailout is the largest among the G8 members. Though the Kremlin continues to assure Russians that their economy is strong, the evidence points to a systemic crisis. As in 1998, people are beginning to change money into dollars, and whispers of "default" are growing louder in Moscow.  

Are the fears of an economic calamity founded? What structural deficiencies are at the root of Russia's current predicament? Has Russia's recent growth and prosperity been too narrowly based--stemming not from modernization but from high commodity prices? How deep is the current crisis--and how severe might the political repercussions be in a country whose population has enjoyed an 8-10 percent income growth in the past nine years? At this AEI event, a group of leading experts on the Russian economy will discuss these and other questions.

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