Russia “can to some extent solve the problem of slow growth” in the case of increasing the amount of loans they write in Friday’s review, analysts of Sberbank CIB Andrey Kuznetsov, Anton Struchenevsky and Cole Axon.
“Previously, a key source of financing for Russia was high oil prices, but now we expect to increase the role of debt financing. As the level of debt in the economy is quite low, in our view, this trend does not threaten financial stability in the near future. Thus, we believe that in the next ten years, Russia can increase its ratio of debt to GDP with the current 100% to 150% without threatening financial stability,” according to the authors. The benefits of this, according to them, will receive the energy companies, the real estate sector (due to growth in mortgage lending) and banking (banks ‘ balance sheets, according to analysts, will grow faster than GDP).
We are talking about the total debt load of the economy, including public debt (debt of the Federal government and the regions, both internal and external) and private debt (of banks, companies and households). The total national debt at the end of 2016 was 13.3 trillion, or 15.5% of GDP (based on data from the Ministry of Finance and Rosstat), the domestic debt of citizens and companies of 39.7 trillion rubles, or 46.3% of GDP (based on the statistics of the Bank of Russia on loans), while external debt of banks and companies to 29.2 trillion (based on estimates of the Central Bank in terms of rubles). That is, the total debt in the economy is not less than 82.2 per trillion, or 96% of GDP.
Debt of the economy at 100% of GDP — not very high by world standards. For example, total debt in China was estimated by analysts at McKinsey 282% of GDP, Japan is 400% of GDP, such European countries as Belgium, Spain, Greece — more than 300% of GDP (as of 2014).
While the national debt in Russia is low, only about 16% of GDP. In the past year in preparing three-year budget, the authorities decided to increase borrowing to Finance the budget deficit in terms of depletion of reserves.
Debt is not a panacea
The ratio of debt to GDP could grow by 5% a year, analysts of Sberbank CIB. That is, each year debt in the economy may grow at least 4.5 trillion RUB It “does not portend a significant risk for the foreseeable future” but will play “a key role in the transformation of economic growth model”. “In itself, the buildup of debt is a financing tool. Finance can be investment growth, and then it will solve the problem of growth in General. But you can attract debt to Finance any speculative transactions, and then that growth is irrelevant,” warns the chief economist of Alfa Bank Natalia Orlova.
The reform program in Russia is preparing the Center for strategic development Alexey Kudrin, in parallel, the Ministry is developing a plan to increase the pace of economic growth. Without reforms the economy is doomed to low growth (less than 2% per year), and the only alternative to them — oil at $100, which is unlikely, the experts wrote the Ranepa, the Gaidar Institute and Etta. “Relax” the authorities may already oil is more expensive than $60, Kudrin said .
At the same time the buildup of debt will contribute to the continued trend in the decline of consumer activity that happens in and because of the positive dynamics in the mortgage, indicates Sberbank CIB. Retail trade turnover is a key measure, giving to understand the extent of fall or growth of the economy — is falling since the beginning of 2015, follows from the data of Rosstat, in the last year, the decline in retail sales was 5.2%. That consumption was previously the main growth driver, but is now unable to provide it, as the population prefers to limit costs and save money, says Sberbank CIB.
Need “additional catalysts”, say analysts — they will be exports and investment. It is in the interests of exporters has a new scheme for the purchase of foreign currency by the Finance Ministry and the transfer to reserves income from the sale of oil price above $40 per barrel, said first Deputy Prime Minister Igor Shuvalov. Although a weak ruble and contributed to import substitution and increased exports, the industry has a lack of capacity, highlights Sberbank CIB.
The growth of debt will play a “crucial role” in increasing investment activity, signs of recovery which is not visible in spite of the lack of capacity and a high income per capital, says the review. Transformation of the economy, according to Sberbank CIB, hindered by high interest rates in the corporate sector, 6% in real terms.
The buildup of corporate debt does not guarantee that the money will be used to invest, the question about where to get the money — “secondary” stresses Orlova of Alfa Bank. The reason for the lack of economic growth, not high rates, but that companies “are not willing to invest in the current environment, because there is no economic predictability, unclear market Outlook, it is difficult to calculate the yield”, says she. Orlov notes that in the case of individuals, the business can pay attention to the possible increase of the tax burden and to understand that in this case, growth in consumer activity will not (the Minister of Finance Anton Siluanov and Deputy Prime Minister Olga Golodets said about the discussion of a progressive income tax, but Prime Minister Dmitry Medvedev has assured that these discussions in the government is not conducted). The same situation with potential clients from among companies — suppliers see that they do not increase your business, and therefore demand can be expected, says Orlov.
With the participation of Ivan Tkachev