Russian Economy General News: #4

Karl Haushofer wrote:

Viktor wrote:A bit smaller drop than expected  

Russia's GDP fell by two percent

Earlier, Minister of Economic Development of Russia Alexei Ulyukayev estimated decline in the Russian economy in January-March at 2.2 percent.

Do you think Russia can return to growth later this year?

Without a doubt. Just during 2014 Putin signed about 1 trillion $ worth long term contracts and just recently yet another 360 billion $ and there is much more to come.

It was extremly important for Russia to survive this initial period until its economy reoriented towards import substitution and the East.

Ministry of Industry: industrial engineering developed in the framework of sectoral plans for import substitution

Import substitution in full swing.

Ministry of Industry and Trade has identified priority areas for the creation of engineering centers at institutions of higher education on the basis of the approved 20 sectoral action plans for import substitution in the industry.

Is bank lending credit greater than that of GDP is good or bad thing

http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS

I see russian lending rate is low as 48 % while even for India it is 77 %

Larger credit base equal to cheaper credit , So Russian bank should increase the credit base.

Austin wrote:Is bank lending credit greater than that of GDP is good or bad thing

http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS

I see russian lending rate is low as 48 % while even for India it is 77 %

Larger credit base equal to cheaper credit , So Russian bank should increase the credit base.

It isn't bad, it's conservative. Higher lending rate augments volatility. And Russia's NPL (6%) are low nominally albeit rather higher in percentage than Western. Why restart the whole Ponzi scheme nightmares of the 90's?

Russia needs to be conservative until the institutions are strong enough to take action and protect the SMB's from predatory lending. Better, Russians themselves fear credit like the Communist Party. It is better that way sofar.

Russia needs the CBR to set the lending rate to under 5%. Suffocating borrowing in Russia is suicidal and
not conservative. Volatility comes from having to many little banks that can go under at any time. But
that is not the main problem in Russia. Even rock solid Sberbank can't do its job since the lowest corporate
lending rate is 8.5%. Companies require banks to function properly. Either they shop for venture capital,
a very underdeveloped market in Russia, or they shop for bank loans. Without access to capital, talk of
import substitution and growth is so much hot air.

Lending rate should scare off potential borrowers who wouldn't be able to pay off the borrowed amount. That is alot more disastrous than the current problem. That's how the housing market collapsed in the US and triggered the crisis in 2008.

Neutrality wrote:Lending rate should scare off potential borrowers who wouldn't be able to pay off the borrowed amount. That is alot more disastrous than the current problem. That's how the housing market collapsed in the US and triggered the crisis in 2008.

You are missing the target.  Sub prime mortage rates have absolutely nothing to do with my point.
Sub prime lending was basically pay almost no interest the first 12 months and then see the full 4%.
If only Russians could even see 4%.  Instead they see more than twice and I am talking about business
operations and not housing.   These are not the same thing.  

Russian companies have been forced to raise capital offshore thanks to the monetarist true believers in
the CBR.  Offshore borrowing could be had for 4% and less.   Until a few years ago the CBR rate was over 10%.
Russia is a long way away from QE and excessively cheap capital.   There is no chance of any bubble formation
and in fact it is the opposite.   The excessive interest rates are crushing Russian development.

Wasn't specifically talking about mortgages. That was just an example. I suspect businesses not being able to make the payments due to insolvency brings a much greater risk.

Actually it is better not to take too many credits, only when necessary. It is far better to invest your profits into development. Russia have quite big foreign exchange surplus and using it for domestic researches and development is investment. Maybe financing through credits is slower, but doesn't place traps in future, because all credits have to be payed with interests. Russia is slowly paying off their credits and low or no credits make your economy more concurent, because there is low or no credit in the price for product.

http://rt.com/business/259669-tool-launch-sanctions-russia/

So ib other words, using open source data, they are going to make it harder for investors.

Oh well, investors are a pain anyway. Grow at your own pace.

That said, credit is good and bad. Some companies barely survive and credit just prolongs their demise. Others use credit to start a business or expand a business. If it is too high, it cuts into profit and makes it very hard financially to start one or expand. Recent CBR decision to increase reserves rather than lowering the interest rates is garbage. They better lower it soon or import substitution wont happen.

medo wrote:Actually it is better not to take too many credits, only when necessary. It is far better to invest your profits into development. Russia have quite big foreign exchange surplus and using it for domestic researches and development is investment. Maybe financing through credits is slower, but doesn't place traps in future, because all credits have to be payed with interests. Russia is slowly paying off their credits and low or no credits make your economy more concurent, because there is low or no credit in the price for product.

Regular corporate operations require credits to function. You are confusing long term debt with short term debt.
Your constraint imposes a catch 22 on Russian business. You want them to use their profits to invest, but they
need to invest first before they can get those profits. That is the real world and not the Mickey Mouse world
yapped about by politicians who always compare the economy to some corner store run by a family. A corner
mom and pop shop does not need to borrow to introduce new production lines and to change its market focus.
It has no relevance for either big business or for macroeconomics.

New business startups require capital. They can't invest any profits since they have none. We are clearly
not discussing the same topic. I am not talking about easy money for the Russian government to build up
long term debt.

http://www.gazeta.ru/business/news/2015/05/18/n_7206645.shtml

So....did banks record a growth but 17B rubles less than last year or did they lose 17B rubles this year compared to a growth from last year? After looking at the figures total, they are far from hurting. And I am not entirely sad for banks losing money either, since they are major part of the initial problem to begin with.

sepheronx wrote:http://www.gazeta.ru/business/news/2015/05/18/n_7206645.shtml

So....did banks record a growth but 17B rubles less than last year or did they lose 17B rubles this year compared to a growth from last year?  After looking at the figures total, they are far from hurting.  And I am not entirely sad for banks losing money either, since they are major part of the initial problem to begin with.

Why wouldn't you be worried about banks losing money? There are people's savings in there and where else would businesses get money from?

sepheronx wrote:http://www.gazeta.ru/business/news/2015/05/18/n_7206645.shtml

So....did banks record a growth but 17B rubles less than last year or did they lose 17B rubles this year compared to a growth from last year?  After looking at the figures total, they are far from hurting.  And I am not entirely sad for banks losing money either, since they are major part of the initial problem to begin with.

It's a bit puzzling because they have upped the provisions for losses for about 27bln, yet they lost 17 bln last year. Is this the typical, we lost 3 but here you have four?


Anyway the losses seem rather modest (350 million USD) and seem to be a conglomerate of issues, from NPL's, defaults, capital flight etc.

Bear in mind this is for 4 months...

Neutrality wrote:

sepheronx wrote:http://www.gazeta.ru/business/news/2015/05/18/n_7206645.shtml

So....did banks record a growth but 17B rubles less than last year or did they lose 17B rubles this year compared to a growth from last year?  After looking at the figures total, they are far from hurting.  And I am not entirely sad for banks losing money either, since they are major part of the initial problem to begin with.

Why wouldn't you be worried about banks losing money? There are people's savings in there and where else would businesses get money from?

How they always got money prior to banking schemes - working.

Banks have hurt the global economy already.

KoTeMoRe wrote:

sepheronx wrote:http://www.gazeta.ru/business/news/2015/05/18/n_7206645.shtml

So....did banks record a growth but 17B rubles less than last year or did they lose 17B rubles this year compared to a growth from last year?  After looking at the figures total, they are far from hurting.  And I am not entirely sad for banks losing money either, since they are major part of the initial problem to begin with.

It's a bit puzzling because they have upped the provisions for losses for about 27bln, yet they lost 17 bln last year. Is this the typical, we lost 3 but here you have four?


Anyway the losses seem rather modest (350 million USD) and seem to be a conglomerate of issues, from NPL's, defaults, capital flight etc.

Bear in mind this is for 4 months...

Once things like foreign debt goes away, they will have a lot more money to work with. Added, once interest rates drop, more people will seek loans.

When all these issues arised, many banks dropped like flies in Russia. And eventually, I imagine many more will too. These banks were the ones with bad loans, bad debt, and were barely surviving and could cause more issues in the future.

There is a reason why here in Canada, there are very few banks. Only a couple really. Rest are credit unions which don't necessarily fall under the same category.

Never trust the Sanoma led finnish media . Russia gdp contracted but little rest you can follow this thread .

Karl Haushofer wrote:

max steel wrote:Never trust the Sanoma led finnish media . Russia gdp contracted but little rest you can follow this thread .

Taloussanomat presented a contraction of 4,5% as a fact. Did the output contract that much really? It is worrying if it is true.

EDIT: The 4,5% contraction was not gdp but industrial output.

Oh shut up.  If you want to believe Finnish media, that is your own fault.  Go find official Russian input.  Or should we continuously have to berate people like yourself for having to keep posting media from Finland, which is known for complete and utter bullshit?  Cause I am tired of having to talk to you trolls about it.

Go away, please.

4.5 is barely anything especially for first quarter.

Karl Haushofer wrote:

max steel wrote:Never trust the Sanoma led finnish media . Russia gdp contracted but little rest you can follow this thread .

Taloussanomat presented a contraction of 4,5% as a fact. Did the output contract that much really? It is worrying if it is true.

EDIT: The 4,5% contraction was not gdp but industrial output.

Russian economy contracted by -1.9 % since 2009 . Not bad after considering the crash in oil prices . It is not even certain there will be a technical " recession " defined by two quarters negative growth .. likely but not certain .

Karl Haushofer wrote:

sepheronx wrote:

Karl Haushofer wrote:

max steel wrote:Never trust the Sanoma led finnish media . Russia gdp contracted but little rest you can follow this thread .

Taloussanomat presented a contraction of 4,5% as a fact. Did the output contract that much really? It is worrying if it is true.

EDIT: The 4,5% contraction was not gdp but industrial output.

Oh shut up.  If you want to believe Finnish media, that is your own fault.  Go find official Russian input.  Or should we continuously have to berate people like yourself for having to keep posting media from Finland, which is known for complete and utter bullshit?  Cause I am tired of having to talk to you trolls about it.

Go away, please.

4.5 is barely anything especially for first quarter.

I agree that out media is extremely biased so that is why I asked here if their claim is true.

Why do you get so emotional anyway? I am pro-Russian myself.

Because, I have had to explain this so many times already, that it is getting so annoying when new members spew the same crap from Finnish media like it is a god saying.  Face it, Finnish media is owned by the USA or foreigners in their endeavour to make Russia look bad in anything.  They own Moscow Times, St.Petersburg times (or whatever it is called) and a whole slew of other garbage.  I, countless of times have had to disprove finnish media claims on this very thread because a Finn cannot seem to learn how to differentiate words and phrases in Russian even through translations, so they come up with their own conclusion in articles.  Add to that, they always Assume and predict which have been utter garbage.

That is why I am hostile about it.  Either someone here has to repeat themselves a dozen times, over and over and over again, or there should be a rule for no Finnish media or about having to lurk before posting.  Or this site is going to be riddled with BS (which is already happening).

Wanna know why all of this is happening? Easy, lets all break it down:

- Most things Russia and Russians purchased were from foreign companies either exporting it straight to Russia or assembling them in Russia
- Most Russians are saving their money, so retailers all over are facing a major glut, especially automotive industry, and only real earners are e-tailers
- Automotive Industry is getting hit the hardest with over 30% decline in purchases, and automotive industry accounts for a huge portion of Russias industrial production (military accounting 25% or more of it, automotive accounting for almost same amount and oil/gas industry accounting the rest).
- Due to oil and gas industry getting hit hard due to sanctions (lack of investors) and oil/gas prices dropping, many manufacturers are pulling back in development of pipelines (especially after the fiasco with the south stream) and thus industrial output for that fell. It will increase soon as soon as the oil/gas starts flowing to China and China's section of pipelines start, and if the Turk stream actually happens and the Turks don't act like the screwups they are in trying to play their games.
- Huge portion of automotive industry is simply assembly plants, and really lack of domestic development of goods. So it is kits mostly.
- Only a few automotive companies actually localized majority of production, like Nissan and their H4 engines are made in Russia. Or Avtovaz using parts suppliers from Russia. So in other words, they are the least hurt because they were able to keep prices down due to the ruble dropping and thus cost of production drastically dropping.
- In contrary to popular belief, if sanctions hit especially in sale of goods, it forces Russia to produce goods. If you ever pay attention to sites like sdelanounas, you will notice significant amount in development of import substitution and new industries popping up. The biggest are right now agriculture and textiles. Soon will be automotive components, heavy industrial goods (automation/robotics/autoCNC), and eventually electronics (last).
- Nothing lasts forever - Meaning new development will spur new growth as Russia starts to develop what is in demand locally. Already other developers who didn't export before, are exporting now.

Perfect example is looking at Iran. Sanctions did more good to it than harm. I always read where industrial, GDP and what not drops in Iran, but Iran became the largest in the middle east in industrial production, regardless what some bullshit international institution from USA has said. Hence why Iran's products are growing in demand in surrounding countries and even soon in Russia.

I can go on for a very long time.

Want news on REAL industrial development? Go here: www.sdelanounas.ru

Learn russian or use yandex translator.

It doesnt matter if you are pro or anti russian . You can learn as much here and clear your doubts . Sana no longer owns moscow times or vedomosti they sold their share to somene else .

Wanna know how western economies are getting their growths from in terms of their "thriving" economies? They added in drugs and prostitution to their numbers.