New Delhi: As the Russian invasion of Ukraine continues and the war is already in its eighth day, there is widespread concern over the state of the Russian economy and its impact on the global financial order.
Already facing the most severe financial sanctions by the U.S., EU, and financial institutions, Russia’s economy is in for a greater shock with experts expressing fears that its GDP may well get ready to absorb a shock by 1.5 per cent.
Ranked 11th largest economy in the world and fifth-largest in Europe, Russia is faced with the freezing of its vast 630 billion-dollar forex reserves. There are already reports in the international media that speak about serpentine queues outside ATMs with people wanting to take out cash and getting their sliding Rubles exchanges. Ruble has already taken a hit by 30 per cent as compared to the U.S dollar. Russia has also been blocked from the SWIFT payment system, restricting its access to its massive foreign currency reserves.
Experts say that people in Russia may not be able to cope with the economic siege and the Russian economy may be reaching a stage of no return. Prospects of higher prices, runaway inflation are looking to be real for the people in Russia.
Russian President Vladimir Putin has destabilized the world order and there is no idea of what he will do next.
Over the past seven to eight years Russia has undertaken a rejig of its gold reserves and considerably raised holdings in China to 14 per cent. Other countries where Russia has kept its gold reserves include Canada, the U.S., Germany, Japan, France, Australia, and the U.K. apart from some international institutions.
If the war with Ukraine continues for another week, a key question being asked by experts is: What will happen to Russia’s financial and economic ties with the rest of the world?