The Russian economy in 2015 – the strip of a protracted recession with the hope of recovery growth

The Russian economy in 2015 – the strip of a protracted recession with the hope of recovery growth


MOSCOW, December 31. /Corr. Maria Bobyreva/. Expectations of the Russian authorities and analysts about the protracted recession of the Russian economy in 2015 is largely justified. Since the beginning of the month were recorded by dynamic reduction of GDP, which gave a reason to constantly revise the annual forecast of socio-economic development. And, unfortunately, to revise almost always in a negative way.

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Only in official forecasts of economic development expectations for the decline in GDP was changed several times. So, in the beginning of the year predicted a decline of 0.8%, then 2.8 per cent, and later to 3.9%. Last wait, declared by the Ministry, amounting to 3.7-3.8 percent.

Unstable oil prices, which fell markedly at the end of the year, nullified the emerging summer stabilization in the economy.

However, a number of analysts and the authorities tend to believe that the situation could be worse, but the economy has shown an ability to adapt in the face of low commodity prices and sanctions. As a result next year can oharakterizovat modest recovery growth.

The bottom and divers

Unchanged in 2015 remained searching the bottom of the crisis of the Russian economy, which Russian economic power began in the end of 2014. Then Deputy Minister of economic development Alexei Vedev said that the economy in mid-2015 can find it and “push”.

For these searches, the head of the Duma budget Committee Andrey Makarov was named the Minister of economic development Alexei Ulyukayev diver, “every two months wearing a diving suit emerges and says: the bottom is reached!”. Commenting on this comparison in an interview to “Komsomolskaya Pravda”, the speaker considered it good, pointing out that “the task of the diver to see the reefs, the shoals, the dangers that interfere with the ship”.

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Speaking in December, the Federation Council, the Minister has reported that doesn’t wear “pink glasses” and the economy really overcame bottom of the recession in mid-2015. In July-October of the monthly were observed GDP growth with seasonality from 0 to 0.3%.

“Stabilization of the situation (July-October) was caused as a fairly good year from the point of view of agriculture, as well as from the point of view of import substitution in those sectors where it could be done fairly quickly without large capital outlays,” says chief economist of Gazprombank Maxim Petronevich. However, he was sure that the lowest point has failed.

Monitoring data from the Ministry of economic development for the November stated the return in the region of negative values decreases in GDP with seasonality amounted to 0.3% the previous month. After positive dynamics in July-October, decreased industrial production, has intensified the decline in agriculture, construction, retail trade, paid services to the population, said the MAYOR.

The main influence on macroeconomic indicators in 2015 in addition to the drop in oil prices had closed the external capital market, says Petronevich. These factors led to a significant devaluation of the rouble. “The devaluation of the ruble, coupled with other constraints led to substantial inflation and a serious decline in the purchasing power of the population”, – said the expert.

Of great concern

The main drivers of the economy – consumer demand and investment have fallen if not depressed, then in a deep melancholy. The consumer sector causes the biggest concern for the authorities, unlike investments, noted the speaker.

According to him, initially expected investment decline at the 10% level. In January-November amounted to 5.5%. Improvements on these indicators given the attachments of the fuel and energy complex, the Minister noted.

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According to chief economist of Alfa Bank Natalia Orlova, in part, this may be explained by the project “Power of Siberia”, and partly it is because in the middle of the summer was held indexation of tariffs of natural monopolies. “Dynamics of investment does not change, in my opinion, patterns of growth, because now the main question concerns the dynamics of consumption, how will the rapid deterioration in the dynamics of consumption. Or Vice versa, may be, this deterioration can be stopped by any action of the government,” the analyst believes.

The cause of the fall in consumer demand MAYOR in its November monitoring refers to the reduction in real wages, rising prices and, as a consequence, the transition to a selectively-savings model current consumption. Retail trade turnover in November to the corresponding period of previous year decreased 13.1%.

“I bind what is happening, with a new round of sanctions now against Turkey. To replace winter Turkish food is quite difficult, so the main effect of sanctions short term, anyway, he materialized in the form of an inflation shock,” said Orlov.

Could be worse

According to Petronevich, the depth of the drop could be more. Consumption to some extent, supported by rising incomes in nominal terms, he said.

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The expert believes that consumer demand for a while will fall. A significant factor in the slower drop could be the resumption of consumer lending. “Banks are now lower point and mentally prepare for a resumption of consumer lending, which was falling the whole year,” he said.

The expert sees reason for optimism in the figures for the decline in GDP in 2015, Recalling 2009, when the fall was 8%. “The year 2015 was quite difficult, because prices continue to storm new low point. But given the fact that we in contrast to 2009 are closed to us capital market, the fact that the Russian economy will fall by 3.7% to 3.8%, is in some degree a great success. Conditions much worse than in 2009, and the results are twice as better,” says Petronevich.

This suggests that the economy of the Russian Federation for all its faults, shows “huge” stability in turbulence. “Other economy would suffer these limitations with much greater losses,” added the analyst.

Again oil

Oil prices will continue to be one of the defining risks for the Russian economy in 2016. Some experts are inclined to believe that the cost of raw materials may be even lower than in 2015. Ulyukayev said that in my prediction for 2016 the economic development Ministry may revise this figure downwards.

Pessimistic assessment of oil prices has given Finance Minister Anton Siluanov. According to him, in 2016 it will cost $40 per barrel. Thus, according to the Minister, the Russian authorities have an understanding of how to act in such circumstances. The Ministry has prepared several measures in this case is to work with income, the privatization and consolidation of the expenditure side of the budget. Financial authorities are ready to adjust the budget at the end of the first quarter of next year in case of realization of this scenario.

“If we are talking about further declines in oil prices, it will be connected, probably, with insufficient demand, which could create China. If China will be a crisis, this will result not just in the fall in oil prices, but also depreciation of other types of resources. This risk can lead to an extended period of low prices,” says chief economist of the consulting company “PF the Capital” Evgenie Nadorshin.

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According to Petronevich, oil prices have already fallen at a fairly low level, which creates risks for the Russian budget, which sets the price when measured in rouble terms, at the level of 3 thousand 100 rubles at the current price level is below 3 thousand. “This creates an additional fiscal risk at the level of 1 trillion rubles, which in principle can be financed from the Reserve Fund this year, but again there will be the hard question of what to do with the budget next year,” he said.

The situation in the financial sector also may have a more significant impact on other sectors of the economy, rather than in 2015, says the Nadorshin. “And here the question – whether the Central Bank to take action, which he is not ready? For example, measures that can affect the targets on inflation targeting” – indicates the expert.

Problems may create and potential rate hike by the fed in connection with the restoration growth of the U.S. economy and to combat inflation. “Not a very material risk, but the fed may begin to raise rates faster than they had planned. This will put pressure on the same oil through the withdrawal of hot money from the financial markets faster than was prepared for this,” says the Nadorshin.

Shaky recovery growth

In 2016 the government expect a small recovery growth of the Russian economy. In the last forecast of Ministry of economic development should be expected at 0.7%. However, after a strong decline in oil prices at the end of the year, Ulyukayev said that the reasons for the deterioration of the forecast exist, and in General announced the revision of forecast for the years 2016-2018 in January 2016. Current expectations of the Ministry foresees inflation at 6.4% average annual dollar exchange rate at the level of 63,3 ruble, oil prices – $50 per barrel.

Opinion on a possible recovery growth is shared by Orlov. “I don’t think that the picture (the results of January-November 2015) may delay the recovery process. I have a concept of growth of 0.3 per cent,” she said.

The analyst justifies its forecast that fiscal policy from the second half of 2016 will be of a stimulating nature before the election. “Then there will be an additional cost that somehow needs to produce results,” said Orlov. In addition, it relies on citizens ‘ willingness to borrow again, which will contribute to the recovery of consumer demand.

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The indicators of 11 months of 2015 suggests that the time period in which one could wait for economic recovery is postponed to a later date, says EDB chief economist Yaroslav Lissovolik. In his opinion, necessary internal drivers for the recovery are not yet available.

Yet to stabilize the performance of wholesale and retail trade, investment, to say that the economy emerged from the early phases of the decline, says Petronevich. “So the economy, in my opinion, on the trajectories of slow, but still reduce”, – he added.

Does not expect recovery growth and Nadorshin. “In 2016 there will be no growth in consumption. All we could do in substitution, most of that happened or is happening. It is not enough to offset a sharp decline in domestic demand, primarily from households,” the analyst believes.