Moody’s has downgraded Ukraine’s sovereign to Caa3, its third from lowest rating, indicating that the odds are on for a default. That doesn’t bode well for Kyiv as it tries to win a fight for its life on economic, military, and political fronts.
But looking over to the so-called “winner” of the Ukraine crisis, Russia isn’t faring much better. The excellent economist Anders Aslund foretold the severity Russia’s economic pain in our pages back in January. Now, his predictions are coming true:
Russia's GDP decline accelerates as expected: January -1.5%, February -2,2%. It is likely to accelerate further.
— Anders Åslund (@anders_aslund) March 27, 2015
The ruble collapse and the economic contraction is already being felt on the ground:
Gaidar Inst says real wages fell 10% in Feb, sharpest drop since '99 crisis; stable real-income data could be due to methodology change
— greg white (@whitegl) March 25, 2015
And according to a Moscow Times report:
A planned 10-percent reduction of the Interior Ministry’s budget in a bid to save costs amid Russia’s economic crisis threatens to “paralyze” the country’s police force, the agency’s chief warned. […]
Budget cuts may also force the ministry to lay off nearly 100,000 of its employees, an unidentified lawmaker quoted Kolokoltsev as telling the chamber during a closed-door meeting Monday, the report said.
Russia’s invasion of Ukraine is being spun, both in Russia and in certain sectors of the press, as a Russian triumph. The truth, however, is far more grim for Moscow. The result of its aggression has been to plunge both Ukraine and Russia into a precipitous economic race down the drain.