Russian Economy General News: #5

Skolkovo innovators eye Cuban market

Russia will invest more in Cuba, significantly more. This is very good news as it will be able to help with Russia's image abroad as well as expand revenue and liquidity.

Russia’s meat exports to China may hit hundreds of millions of dollars

Far East ecology innovations require about $3 billion — minister

Austin wrote:How much is Russia GDP today in Trillion Roubles ? Should give a good idea of the % of public debt internal and external

Actually it is the debt servicing costs that matter and not the nominal debt number. Russia's federal government is not
constricted by debt servicing costs. This is why lumping private (corporate) debt with state debt and then running
around bleating about it is retarded. Russia's state debt is trivial and servicing costs are negligible. Private companies
are obviously not going bankrupt due to their debt levels so there is nothing to talk about. The US total debt from
government and corporations is $25 trillion ($16 trillion government + $9 trillion corporate).

The interesting news is that Russia is unloading debt and fast

http://www.reuters.com/article/2015/01/20/russia-crisis-cenbank-debt-idUSL6N0UZ15320150120

http://sputniknews.com/business/20150616/1023419663.html

http://www.cbr.ru/eng/statistics/credit_statistics/debt/debt_maturity_e.xlsx

Russian government debt as of June 2015 was $36.4 billion down from $61.7 billion in December 2013. Total debt
went down from $728.9 billion in December 2013 to $555.7 billion in June 2015. And the unloading is still in progress.

Project Canada wrote:After successful Russian cruise missile strike against USIS targets, suddenly Crisis-hit Russia toiling to keep factory towns alive

This is what is called cherry picking. I can find some one-industry town in the USA or Canada which is slipping away also.
The point is that you cannot invert this one data point to give you the whole manifold of the economy. These sorts
of articles are retarded propaganda. With the PMI at over 51 in September we have a sense of what industrial activity
is really like and it is not contracting.

Many so called monograds been "dying" since the 90's.  Ones like Togliatti will survive due to being main automotive manufacturer but also have invested in chemical processing and other industries.  I can see one horse towns in Russia closing up and people moving to other regions, but that is what always happens. Everywhere.  Like KVS said, cherrypicking is what US does best in its media and I dont think it is welcomed.  Facts are facts.

What is funny though, is your article actually paints a different picture, if you skip over the hysterical propaganda. It talks about the (only mentioned monograd in the article) about how it is diversifying by opening up greenhouses and modernized their factory which helps reduce overhead, which helps in terms of profits.

BTW, KVS, on trading economivs the PMI for manufacturing is 49 for sept.  So where is your figure from if you dont mind me asking?

http://trueeconomics.blogspot.ie/2015/10/11015-russia-manufacturing-pmis-some.html?m=1

Essentually, there are still oversupply of older products still awaiting to be cleared, but major gain was import substitution.  So regarding already operating manufacturing, here may not be a pmi for a bit till old supplies are sold off.  But there are growing orders for new products.  As well, demand from outside Russia has dropped considerably, so that is another factor.

http://trueeconomics.blogspot.ca/2015/10/51015-russia-services-composite-pmi.html?m=1

On service sector which is considerably higher in growth.

sepheronx wrote:Many so called monograds been "dying" since the 90's.  Ones like Togliatti will survive due to being main automotive manufacturer but also have invested in chemical processing and other industries.  I can see one horse towns in Russia closing up and people moving to other regions, but that is what always happens. Everywhere.  Like KVS said, cherrypicking is what US does best in its media and I dont think it is welcomed.  Facts are facts.

What is funny though, is your article actually paints a different picture, if you skip over the hysterical propaganda. It talks about the (only mentioned monograd in the article) about how it is diversifying by opening up greenhouses and modernized their factory which helps reduce overhead, which helps in terms of profits.

BTW, KVS, on trading economivs the PMI for manufacturing is 49 for sept.  So where is your figure from if you dont mind me asking?

From Victor's linked article:

Одновременно в обрабатывающих отраслях был зарегистрирован незначительный рост объемов производства. Подобный некоторый рост был зарегистрирован впервые с апреля этого года. Это позволило соответствующему совокупному индексу подняться до отметки 50,9 балла против 49,3 балла в августе.

"Trading Economics" gives me the impression of not having the latest data and would be careful about their attribution.

sepheronx wrote:http://trueeconomics.blogspot.ie/2015/10/11015-russia-manufacturing-pmis-some.html?m=1

Essentually, there are still oversupply of older products still awaiting to be cleared, but major gain was import substitution.  So regarding already operating manufacturing, here may not be a pmi for a bit till old supplies are sold off.  But there are growing orders for new products.  As well, demand from outside Russia has dropped considerably, so that is another factor.

http://trueeconomics.blogspot.ca/2015/10/51015-russia-services-composite-pmi.html?m=1

On service sector which is considerably higher in growth.

Consumer demand will lead the manufacturing demand so the "implosion" of the Russian economy much discussed by the NATO MSM
is a flop.

kvs wrote:

sepheronx wrote:http://trueeconomics.blogspot.ie/2015/10/11015-russia-manufacturing-pmis-some.html?m=1

Essentually, there are still oversupply of older products still awaiting to be cleared, but major gain was import substitution.  So regarding already operating manufacturing, here may not be a pmi for a bit till old supplies are sold off.  But there are growing orders for new products.  As well, demand from outside Russia has dropped considerably, so that is another factor.

http://trueeconomics.blogspot.ca/2015/10/51015-russia-services-composite-pmi.html?m=1

On service sector which is considerably higher in growth.

Consumer demand will lead the manufacturing demand so the "implosion" of the Russian economy much discussed by the NATO MSM
is a flop.

Of course. Russian market is 80%(+ a few more) of Russias GDP. So Russia is a consumer and tax orientated country. The move for creating sollers and other auto plants was specifically for the Russian market as Russia was a huge consumer of automobiles. Same with construction materials. User on sdelanounas (user287 or whatever) had data on concrete production and import. And even though Russia is a very large producer of cement, they still import a ton as they dont produce enough for their consumption. This goes for 2015 too. Same also for petrol.

And?

Do you think Russias economy actually dropped by half? No. Nominal dropped in half thanks to rubles forex value dropped in half. Look at PPP figures. If you use last years forex value of roughly 35Rub/usd you will see it as a $2.3T economy. So you will see why it has now become pointless to value in USD term. Far better to just calculate in rub term for nearly everything. I am bad for also looking at it in the exchange value and not the value it really is in rubs itself.

sepheronx wrote:And?

Do you think Russias economy actually dropped by half? No. Nominal dropped in half thanks to rubles forex value dropped in half. Look at PPP figures. If you use last years forex value of roughly 35Rub/usd you will see it as a $2.3T economy.  So you will see why it has now become pointless to value in USD term. Far better to just calculate in rub term for nearly everything.  I am bad for also looking at it in the exchange value and not the value it really is in rubs itself.

Indeed. Even the $2.3 trillion from the 35 exchange era is meaningless. It was over $3.3 trillion in PPP. The only comparison that makes
any sense is in terms of PPP. The rest is meaningless. Even PPP fails to capture the true extent of the differences as it is biased towards
consumer prices and does not properly take into account situations like in Russian military industry where prices are far from their western
counterparts.

In my view the Russian GDP in some ideal PPP metric is closer to $5 trillion. Modern western economics is a pseudo-science that does
not properly evaluate the physical economy. Too many fads and approximations in this field.

http://sputniknews.com/columnists/20151007/1028147778/russia-west-economy-syria.html

Most people accept the conventional measure of Russia's GDP based on US dollars is wrong. The IMF and the World Bank prefer to estimate Russia's GDP on the basis of purchasing power parity. On that basis Russia has the world's fifth biggest economy, roughly the size of Germany's.

Even that estimate in my opinion is wrong. It is not that the statistics are wrong. It is that what is being compared are sets of statistics rather than two totally different economies.

I know Germany well. I can confidently say that Russia's economy operates on a far bigger scale. It is physically impossible for Germany to do many of the things Russia does without effort. Conversely there is nothing Germany does that Russia cannot do if it commits itself to doing it.

The only economies that can match or surpass Russia's in technology and depth of resources — and can do all the things Russia does — are those of China and the US.

India, Germany and Japan can also do some of the things Russia does, but not all of them.

No other states come close.

This opinions of this author are right on target. The physical capacity of Russia's economy is grossly underestimated even by the PPP
metric.

We have to take into account that there are areas that are considered black holes for Russia, especially in economics. Chechnya is one of them. I would say various villages/towns are also (monograds as an example). The right direction is the one being taken to provide funding for monograds to help them diversify their own productions with even success cases where places like Togliatti has moved past just simple car manufacturing (although, Avtovaz owns all the other industries which I am not fond of the idea), and food seems to be the big one most are investing in to diversify. Also, modernization of plants are helping. But there are villages that have been pretty much untouched since 50's and need the development. They need to become productive again. Many of them have land that would be good for mass farming (not factory farming, which imo is immoral and just downright dirty) and many of them can be modernized to do more than just farming and what not (producing end goods. Some villages make jewelry from Amber as an example). But many areas are almost exactly like what you can find in backwaters Iran or India. Because lack of proper attention. I think there should be a town/village revitalization program, where they determine the villages/towns that are heavily underfunded, see what areas of industry might do well (canning, paper production, mining, etc) and see about investing in those places. As well, there needs to be a massive infrastructure program. Building new roads, new railway lines, new utility and information centers, etc. And as well, maybe even make it far easier to own a business in a village than anywhere else, like a small bakery or a small jewelry shop or something.

Austin wrote:Why cant they just borrow from local market and increase their public debt and use that money for investment and development of projects ?

Because of self governed Austerity.  They been living off of Austerity since the early 2000s so they are afraid of any kind of deficit.  So instead, they use the reserve funds for any over spending.  Which is the right thing to do IMO at current rate.  They still have welfare fund as an example.

They should, IMO merge the two funds as 1, and introduce a new fund - modernization and investment fund - to help provide the money needed for various projects without dipping into the total budget.  And to replenish the fund, is to use profit margins gained through taxation and what not, from those investments, back into it.

Right now, Oil companies are still gaining a ton of profit in current market.  So it may be in Russias best interest to gain from that.  I know on Lenta they had an article on it, but left much to be desired as they stood by the oil and gas companies in that they shouldnt raise the taxes on them due to them threatening to cut off investments of 7billion over certain amount of years.  Then there is the fact that if they increase taxes by 1% to 14%, they would gain another $220B.  But they dont want to do that due to it will cut into peoples spending.  So then there is the idea that moving the retirement age will save over 600B, which is the plan to do.  Then there is the idea of the central bank providing more credit to the banks.  But that isnt in the question.

So reserve fund may not get depleted cause they will intervene before it does.  They will probably come up with a plan on skimming a bit more from the oil and gas industry and move such profits to the reserve fund.  Or they may only use part of it to help and gain a bit of debt as well.  Then there is of course other sectors where they will obtain more taxation money from - Agriculture, mining and metallurgy industries where there was talk of potentially getting more out of them.  But of course, people will complain.

So the ultimate question will be: Is it better to make cutbacks or will it be better to increase taxation and obtain more from industries in order to keep on track...

Edit: What does he mean by no foreign markets