Russian Economy General News: #11

calripson wrote:

Austin wrote:https://ria.ru/20191205/1561989265.html

"The budget surplus in 2019 will be about 1.8% of GDP," the prime minister said.

"Now we have a budget surplus. We assume that this surplus will be somewhere around 1.8% of GDP. This is also a very decent margin of safety, which allows us to look ahead with confidence," Medvedev said.

Around $31 billion in US dollars. Oil prices have averaged circa $60/barrel in 2019 but gas prices have fallen significantly - Gazprom rates are down 30% year on year to Europe and the lowest in 15 years. This is due to oversupply primarily from US fracking and the rapidly developing LNG market. It will not reverse any time soon. Oil prices have been supported by the Saudis who are trying to float shares of Aramco.

Break-even budget forecasts in 2019 were predicated on circa $40/barrel oil prices and Russia adds roughly $2 billion per $1 above that level to the budget (or subtracts below), so an extra $40 billion less lower revenues on Gazprom profits and exports equals $31 billion.

Russia's biggest miss is the lost investment income of reserve funds which historically when invested in capital markets have returned circa 1% per annum in dollar terms. Returns on plain vanilla pension fund type investments in the US over the same time period average 7-8% per annum, an opportunity loss of over $100 billion.

Hole wrote:Most pension fonds in Amiland can´t pay their customers because of 0% interest rates and stock markets collapsing every 8 - 10 years.

kvs wrote:

calripson wrote:

Austin wrote:https://ria.ru/20191205/1561989265.html

"The budget surplus in 2019 will be about 1.8% of GDP," the prime minister said.

"Now we have a budget surplus. We assume that this surplus will be somewhere around 1.8% of GDP. This is also a very decent margin of safety, which allows us to look ahead with confidence," Medvedev said.

Around $31 billion in US dollars. Oil prices have averaged circa $60/barrel in 2019 but gas prices have fallen significantly -  Gazprom rates are down 30% year on year to Europe and the lowest in 15 years. This is due to oversupply primarily from US fracking and the rapidly developing LNG market. It will not reverse any time soon. Oil prices have been supported by the Saudis who are trying to float shares of Aramco.

Break-even budget forecasts in 2019 were predicated on circa $40/barrel oil prices and Russia adds roughly $2 billion per $1 above that level to the budget (or subtracts below), so an extra $40 billion less lower revenues on Gazprom profits and exports equals $31 billion.

Russia's biggest miss is the lost investment income of reserve funds which historically when invested in capital markets have returned circa 1% per annum in dollar terms. Returns on plain vanilla pension fund type investments in the US over the same time period average 7-8% per annum, an opportunity loss of over $100 billion.

Russia cannot invest its money abroad.  It does not have the stock market large enough to absorb the volume of investment and yield
the returns you point to.   So $100 billion is a theoretical figure not accessible in the real world.

Except during the period in question, that is exactly what they did do - invest a substantial portion of the reserve funds abroad in the form of European and US government debt securities with piss poor yields. In fact, they financed the government deficits of NATO countries. You do have a semi-valid point in that Russia would be subject to potential asset freezes if the invested in offshore hedge funds or the S&P 500 for example. The US would be much more reticent to take such action involving their own government debt securities.

calripson wrote:

Hole wrote:Most pension fonds in Amiland can´t pay their customers because of 0% interest rates and stock markets collapsing every 8 - 10 years.

Entirely untrue. Average returns over any 10 year rolling period of any 60/40 fund average 7-9% with the historic equity risk premium to treasuries a consistent 6-7% over the last 50 years. Even after 2008 when the S&P fell 40%, markets recouped all that loss in less than three years. Year to date, the S&P is up roughly 24%. People get rich by investing in innovation and technology, not by putting money under the figurative pillow.

Hole wrote:

calripson wrote:

Hole wrote:Most pension fonds in Amiland can´t pay their customers because of 0% interest rates and stock markets collapsing every 8 - 10 years.

Entirely untrue. Average returns over any 10 year rolling period of any 60/40 fund average 7-9% with the historic equity risk premium to treasuries a consistent 6-7% over the last 50 years. Even after 2008 when the S&P fell 40%, markets recouped all that loss in less than three years. Year to date, the S&P is up roughly 24%. People get rich by investing in innovation and technology, not by putting money under the figurative pillow.

Absolutely true. The californian pension fund alone has a gap of 50 to 60 Bill. $. Instead of a pension of 3.000 bucks (which is not much in California) the customers will receive only 1.500. If the stock market doesn´t collapse again.

Most muricans don´t own stock, the got saving or retirement plans from banks/insurance companies. This is were all the shit from wall street ends.

Austin wrote:It would be very naive to think that CBR decreasing its interest rates can some how magically boost Russian Economic growth trajectory. If that were to be remotely true then China PBOC would decrease its rate to 1-2 % and Chinese economy will start growing at 8 , 9 or 10 % or India RBI with lowest interest rate at around 5 % still got the worst GDP numbers in recent years.

CBR can do as much it can because it primary mandate is Inflation and Macro Economic Stability.

It is the Putins government that has caused the economic slow down because they kept pushing Structural Reforms as a trade off for Stability , Unless the Government can carry out range of structural reforms and significant increase private investment in the economy things like low interest rates or National Projects can do this much.

Russian Government should lay out structural reform plans for the next 5 years follow it clock wise if its GDP numbers has to be bumped beyond 1-2 % Growth.

calripson wrote:The Central Bank rate is set at a level that retards business activity. The original response post 2014 sanctions was to defend the ruble and to stem the tide of capital outflows. That crisis period has passed and the ruble is stable. There is no threat of inflation. Certain individuals and banks benefit from higher central bank rates - that is why they are not lowered.