It's been fascinating to watch the Russian economy adjust to sharply lower oil prices. With a little help from the central bank, the country's recession might not be as bad as previously thought.
After an initial period in which the ruble plummeted and inflation surged — with food prices up 15.4 percent from a year earlier in December — the Russian central bank's response is turning things around. A sharp increase in short-term interest rates, currently at 14 percent, has stabilized the ruble and might even be getting consumer prices under control.
The episode has taken a toll on Russian living standards. In the first quarter of 2015, inflation-adjusted incomes were down 1.4 percent from a year earlier. Retail sales dropped 6.7 percent — and individual stores, such as the M Video electronics chain, reported even steeper declines. Imports were particularly hard hit, thanks to the impaired buying power of the ruble: In January and February, they were down 37.9 percent from a year earlier. The government's finances haven't fared well, either. Standard & Poor's predicted Friday that Russia's fiscal deficit will rise to 4.4 percent this year, higher than the 3.7 percent the government predicts.