The Russian economy contracted 4.3 percent in the third quarter, as economic sanctions continue to plague the economy, according to AFP. Russia was also hit hard by falling oil prices and low spending levels not seen in 15 years. In addition, household income plummeted 9.7 percent in September and 9.8 percent in August. The International Monetary Fund notes that Russia could lose 9.0-percent GDP from Western-imposed sanctions.
Forbes named Russian President Vladimir Putin the world's most powerful person for the third year in a row, but he grows more vulnerable as the Russian economy worsens. Western sanctions take a toll on the economy, but leadership shows no sign of backing down.
Sanctions imposed on Russia are over the annexation of Crimea and involvement in East Ukraine, but such actions did not stop Putin's foreign policy aspirations of protecting the Syrian regime and commencing airstrike campaigns against ISIS. With crippling sanctions and low energy prices, Russia stands at a further disadvantage as a prolonged foreign policy excursion could further derail reform efforts.
Poverty in Russia rose to its highest level in over 15 years, stemming from declining wages and a lack of consumer money that could have fueled the economy. Russia also becomes more isolated as less Russians travel abroad and consume imports. Moreover, the workforce is in disarray, but the Russian labor market tends to cut wages and hours instead of laying off workers en masse.
The unemployment rate stood at 5.2 percent in September, the same level from November 2014. Citizens also contend with rampant inflation because of the ruble's drastic fall against the dollar in the past year, and central bank policies have thus far failed. In addition, rising food prices is a factor causing the poverty rate to increase 15.1 percent, and over 35 percent of people living in certain areas live in dire poverty.
Analysts note that the Russian economy could drop as much as 4.3 percent in 2015 if oil prices continue to hover around $50 a barrel. Russia may be undergoing a dark period, but a glimmer of hope lies ahead, as experts believe the economy will grow in the future.
For instance, the World Bank notes that the economy will shrink 3.9 percent in 2015, but will expand 0.7 percent in 2016. Ratings agency S&P contends that expansion will average around 0.4 percent annual growth from 2015 and 2018.