Russian Economy General News: #5

kvs wrote:

Austin wrote:OECD expects Russian GDP to shrink 4% in 2015, 0.4% in 2016

http://www.interfax.com/newsinf.asp?id=631702

MOSCOW. Nov 9 (Interfax) - The Organisation for Economic Co-operation and Development (OECD) expects Russian GDP to shrink 4% in 2015 and 0.4% in 2016, the OECD said in a statement.

The latest outlook is worse than the 3.1% decline and 0.8% growth that the OECD forecast in June.

The OECD gave its first 2017 forecast, which is for 1.7% growth. The organization previously forecast the transition to growth as early as the second half of this year.

"The economy is in recession. Falling oil prices, international sanctions and capital flight have reduced investment, domestic consumption and imports. The large depreciation of the ruble has pushed inflation to double digits and reduced real incomes, especially of the poorest. Recovery will be only gradual against the backdrop of an uncertain external environment and lack of structural reforms. Unemployment will rise from the current low levels. Growth is projected to turn positive in 2017 as exports strengthen and domestic demand recovers," the OECD said on November 9.

Annual inflation is expected to accelerate to 15.6% this year, from 7.8% in 2014, but subsequently to decelerate to 9.5% in 2016 and 6.1% in 2017. The inflation forecasts are better than the June outlook, which saw consumer prices rising 16.3% in 2015 and 7% in 2016.

Russia might have a budget deficit of 4% of GDP in 2015 and 3.2% in 2016, compared with 3.7% and 1.2% forecast in June. The deficit will likely narrow to 1.8% in 2017.

Russia will have a balance of payments surplus of 6.6% in 2015-2016 and 6.2% in 2017.

The Central Bank of Russia expects the economy to decline by 0.5%-1% in 2016 if oil trades at $50 a barrel, but the Economic Development Ministry and Finance Ministry expect it to grow 0.7%. Analysts told Interfax in a consensus forecast at the end of October that they thought GDP would fall 3.8% this year and that there would be zero growth in 2016.

Actually these are very low numbers.  If you consider the fact that the world is actually in a recession and the fact that Russia underwent a currency devaluation shock
that resulted in an inflation spike that significantly impacted consumer demand and production leading the the 2nd quarter contraction, then you have to admit that
there are serious rebound processes in Russia.   Taking 2009 as a reference, Russia's GDP could have dropped 12-15%.   My theory is that import substitution is actually
a major stimulus and offsetting most of the decline.

TheArmenian wrote:Apparently, despite the sanctions, some Russian made firearms are still getting through to the USA.

When the Americans placed Concern Kalashnikov on the sanctions list, they did not realize that the Molot factory in Vyastsky-Polyanny did not become part of CK as planned. So, Molot is not under sanctions and its firearms are still being imported to the USA. Note that the Molot-made firearms are based on the AK Kalashnikov design.

Austin wrote:Risk of shortage in Russia's 2016 budget revenues estimated at over $15.48 bln — media

http://tass.ru/en/economy/835476



I still dont understand to cover budget deficit why cant government borrow from central bank at low interest and pay it back when they have surplus.

Central bank can set aside 1 or 2 billion every month from forex and then at end of year will have 12 - 24 billion that they can loan to government.

Why borrow at high interst rates from market when they can borrow at low interest from CBR

Karl Haushofer wrote:Do you think Lukashenko will turn out like Yanuk if the nationalists manage to organize?

Karl Haushofer wrote:Good news from the agricultural front: http://sdelanounas.ru/blogs/70311

At the end of the year of 2015 domestically produced food and agricultural products covered 88,7% of the Russian market. Only about 12% of the food consumed in Russia is imported. This is clearly one of the sectors where Russian economy has done well.

MOSCOW, November 13. /TASS/. Russia’s Reserve Fund may reach nearly 1 trillion rubles (roughly $15 bln) by the end of 2016, Finance Minister Anton Siluanov said in the State Duma, lower house of parliament, on Friday.

"Next year, 2.1 trillion rubles ($31.5 bln) will be used by the Reserve Fund. If the macro-economic situation is same as it was laid down by the forecast, about 1 trillion rubles will remain in the Reserve Fund at the end of next year," he said.
Capital outflow from Russia may reach $60-65 bln in 2015

The minister said the capital outflow from Russia may reach $60-65 bln in 2015.

"We see a decline in capital outflow and even its inflow in the third quarter. According to our estimate, this year the capital outflow will be $60-65 bln," he said.

Austin wrote:I wonder what more economic sanction can US apply they have applied all that they could

MOSCOW, November 13. / TASS /. Low oil prices have and will continue to have a negative impact on the Russian economy. This was stated by Chairman of the Bank of Russia Elvira Nabiullina, speaking in the Duma.
"The transition of the oil market to a new equilibrium with lower price has and will continue to have a negative impact on the Russian economy," - said Nabiullina.

Inflation and volatility of the ruble

At the same time the volatility of the ruble does not create risks to financial stability in Russia, she said.

"Under the influence of external negative factors remain high volatility of the ruble, however, has decreased since the beginning of the year and no longer poses a serious risk to financial stability," - said Nabiullina.

Chairman of the Central Bank, speaking about inflation, stressed that her figure will continue to decline in 2016, at the end of 2015 will amount to 12-13%. At the same time the achievement of the inflation will not hinder economic growth, Nabiullina stressed.

"In making decisions on monetary policy, we always have in mind the balance of risks for inflation and the economy. Achieving the goals of inflation will not hinder economic growth," - she said.

According to her, in the exporting and import-substituting industries formed a stable situation.

"Along with the adaptation of the balance of payments we're already seeing signals of changes in the structure of the economy. The first signs that the export and import sectors, the situation is starting to look a little more stable," - said Nabiullina.

"Inflation is slowing, we expect it to fall to 12-13% by the end of this year. According to our forecast, inflation will continue to decline quite rapidly in the next year, which will contribute to a moderately tight monetary policy and fiscal policy and restrained low demand ", - she said.

However, according to Nabiullina, the sharp demand for cash, in the past two years, at the end of 2015 will not be.

On the reduction of external borrowing for banks

CB Chairman noted that the restriction of access of Russian banks to external borrowing leads to a reduction in foreign exchange earnings by $ 200 billion a year.

"The fall in oil prices in the aggregate of the restrictions on access of Russian banks and companies to foreign borrowing leads to a reduction of foreign exchange earnings. According to our estimates, about $ 200 billion on an annualized basis ", - she said.

Credit growth

This Nabiullina said that credit growth has resumed, the banks increased lending to companies by 7.1%.

"Lending slowed down, and in some areas, such as small businesses, will continue to decline. However, recent months credit growth has resumed. In 10 months the banks increased lending to companies by 7.1%, excluding foreign exchange revaluation - 2.2%," - she said.

"Credit growth is despite the fact that the quality of the loan portfolio deteriorated. However, in this area we can see some positive developments: arrears grow, but this tendency is attenuated. In October, the share of overdue loans to non-financial corporations increased by 0.1 percentage points to 5.9% for retail loans - from 8 to 8.1% ", - explained Nabiullina.

On the outflow of capital

The outflow of capital from Russia, associated with questionable operations decreased in 2015 compared to the previous year by 2.5-3 times, said chairman of the Bank of Russia.

"With regard to suspicious transactions, we have seen a dramatic decline. According to our data, the volume of output of such dubious grounds decreased by 2.5-3 times," - she said.

Which character will carry foreign debt payments

Payments on foreign debt in the 4th quarter amounted to $ 8 billion in the 1st quarter 2016 - $ 6 billion.

"Payments for the next year on the external debt will be of uniform character. According to the survey of the 30 largest companies, foreign debt payments based on intra-group financing in the fourth quarter of this year will amount to $ 8 billion in the first quarter 2016 - $ 6 billion," - she said .

It is necessary to implement policies that will lead to lower interest rates on all loans. Volatility in global markets remain "considerable time."

Under the program of support for investment projects used 43.7 billion rubles from the limit of 100 billion rubles.

"As of today, the program used to support investment projects of 43.7 billion rubles from the limit of 100 billion rubles," - she said.

Nabiullina recalled that there are 4 specialized tools to support lending. This support for small and medium businesses, where the rate of 6.5%, non-oil exports, project financing at a rate of currently 9%, and military mortgage.

Status of foreign reserves

The Bank of Russia does not set itself the goal of increasing the level of gold in the international reserves of the Russian Federation, said Nabiullina.

"In terms of gold no purpose," - said the head of the regulator.

Nabiullina noted that the Bank of Russia has consistently pursued a policy of diversification of foreign exchange reserves.

"This year and last year we bought gold, which is on the market. When there is a possibility we can increase our overall foreign exchange reserves, while they diversify," - she said.

Russia's international reserves consist of cash in foreign currency, Special Drawing Rights (SDRs), reserve position in the IMF and monetary gold.

According to the Central Bank, international (gold and currency) reserves of Russia for a week - from October 30 to November 6, 2015 - decreased by $ 3.1 billion to $ 366.1 billion. The Bank of Russia has a purpose for several years to increase the volume of international reserves to $ 500 billion .

"Capacity of foreign exchange reserves, we have the desired benchmark of $ 500 billion, not a three-year term, it could be 5-7 years and more. We believe it is necessary in terms of creating additional financial cushion for the state in the face of such external uncertainty," - she said.

The Bank of Russia does not expect "hard landing" of the Chinese economy.

"The Chinese economy is very large and has an impact on many countries, the global financial market, the price of oil. We do not expect a hard landing for the Chinese economy", - she said.

Moscow. November 13. INTERFAX.RU - The Finance Ministry expects while maintaining the situation on foreign markets to bring it up to $ 3 billion next year, Finance Minister Anton Siluanov, speaking in the Duma.

"We set ourselves the task to penetrate foreign markets, as these external borrowing will be acceptable on interest rates for us. Up to $ 3 billion in the draft budget stipulates the right of access to foreign markets. I am sure that if the situation does not change, we will be able the money to bring to financing the budget deficit, "- he said.

The Minister also noted that the net domestic borrowing in 2016 will amount to 300 billion rubles to 80 billion rubles this year. However, the main source of financing the deficit remains the Reserve Fund.

Siluanov also said that the Ministry of Finance expects capital outflows in 2015 to be $ 60-65 billion. "We are seeing a decline in the outflow of capital and, on the contrary, in the third quarter even its tributary. Our estimates for the current year are about $ 60-65 billion, which is considerably less than we did initially (forecast - approx. IF) at the beginning of the year: it estimates were more than $ 150 billion, "he said.