On average, the decline in foreign trade of a defaulting country has persisted for 15 years.
In early May in Russia with a very high probability there will be a default on external liabilities. There will be no catastrophe, no matter how much we want it. Since the reasons for this default are not economic but political, its economic consequences will not be devastating. But the consequences will be the same. Yulia Samaeva, editor of the economics department of ZN.UA , writes about this in the article – Russia's default. What does this mean? ”
First, sovereign default is a big trouble in itself. This is the worst signal to the financial universe that there can be. And the lack of foreign lending and investment in the Russian economy as such is good news for Ukraine. Researchers at Boston University once estimated that 88 percent of the wars between 1823 and 2003 were funded by countries.
Second, restrictions on foreign funding will force Russians to cut even more their spending, adding fragrant spices to an already rather steep broth from the economic downturn, rising inflation, declining investment and rising unemployment.
Third, defaults have both short-term and long-term consequences. For example, the IMF at one time, analyzing the defaults of a number of countries, estimated that the average decline in foreign trade of the country that survived the default persists for 15 years. Such countries return to foreign capital markets at least eight years after default. Even better, the political consequences for the defaulting government are always painful and irreversible.
Read also: “Time H”: Russia is expected to default on May 4
materials of Yulia Samaeva can be found at the link.
