Recalling recession: 10 years on from Russian crisis

It is ten years since Russia faced the most devastating economic crisis in its modern history. In August 1998, the government declared a ‘default’ – which meant that the state couldn't pay for its own bonds. The rouble was devalued, inflation

Ten years ago Evgeny Nikiforov was selling groceries. He says people back then just couldn’t afford anything other than food for themselves.

When Russia's economy was struck by the 1998 economic crisis, retail prices were rising by the hour, and store keepers rushed to provide more merchandise, as customers started sweeping everything off the shelves.

“Turnover was extremely high,” Evgeny recalls. “Those goods, which were not in demand for months, sold out in five days. The best selling products were matches and salt, followed by all kinds of tins.”

The crisis hit Russia on August 17, 1998. It was preceded and triggered by the Asian financial crisis. The annual inflation rate rose to 84 per cent, undermining the rouble and devastating the economy.

Mercifully, Russia looks different now. There are thousands of construction sites, and many Russians can afford to invest in real estate. But back then some people lost everything.

Aleksey Kravchenko still remembers his personal tragedy. He was 22 at the time and hoping to move from his small town to Moscow to start a new life. Three days before the crisis Aleksey let his house for rent, and travelled to the capital together with his family. The Kravchenkos were shocked to find that the money they had was not enough for a single dinner.

“The crisis killed the possibility of moving my family here quickly. The family fell apart soon after – partly because I was unable to ensure financial stability at the time,” says Aleksey.
Banking analysts doubt that a crisis on such a massive scale could be repeated in modern Russia. They say there are laws to protect people's investments, their accounts are insured, and the whole financial system is more secure than it was in 1998.

However, the fear is still there.

“Polls indicate that many people are still afraid of another crisis,” says economic expert Kirill Tremasov.

As Russia's economy is on the rise, it looks like there is no reason to distrust the government's financial policies. But as many Russians still remember the 1998 crisis, they say they have learned its lessons. For entrepreneurs and for thousands of investors it was an introduction to the market economy: the idea that money can be lost as well as made.