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Facts Analysis Domestic economy begins to demonstrate first signs of recovery
1
By the end of June,
cumulative foreign
investment in the
Russian economy reached Moving away from the bottom
$242.5bn, up 0.1pc compared
with the corresponding period
last year, the Federal State Sta- In May in seemed that Russia nation is that banks and com-
tistics Service reported. was approaching a turning point panies have been able to rene-
in the crisis and was likely to gotiate existing loan agree-
2
Recent economic start to recover. This is exactly ments. And the key reason for
improvements also what happened during the this is the absence of a soft
boosted tax collec- summer as production, bankruptcy notion in Russian
tion, allowing the Federal Tax investment and consumption law. As such, banks are pushed
Service to meet 63pc of its an- have embarked on a recovery to extend loans (maybe requir-
nual collection target in July and path. A stable rouble and falling ing higher interest rates or bet-
73pc in August, a hefty increase inflation let the central bank cut ter collateral) and companies to
of more than 52pc in the first six policy rates, which might bolster accept new terms.
months of this year. credit growth in the coming In Russia, if a company goes
quarter. bankrupt it has to completely
3
The Consumer Price halt production, dismiss its
Index for January-Au-
VIKTOR KUZMIN
workforce etc. Hence banks
gust stood at 108.1pc, RUSSIA NOW preferred to hope for an eco-
1.6 percentage points down nomic recovery that will bail
from 109.7pc for the same pe- In the summer the economy has out all the troubled companies
riod last year. In annual terms, embarked on a recovery trend rather than to bankrupt their
inflation dropped from 12pc in and has probably gathered mo- clients.
July to 11.6pc in August. mentum for a good step for- Falling interest rates on corpo-
ward. Investment edged up in rate loans is a good indicator
July, taking the lead from net that banks see their business as
exports. Consumption has also slightly less risky than earlier
Quotes
demonstrated fi rst signs of re- this year. Russian companies’
covery and may catch up on a profi tability has also increased
‘I am sure that Rus-
large budget stimulus coming substantially, having almost
sia has a chance of
in December and a likely turn- reached last summer’s levels. PHOTOXPRESS
becoming one of the
around in unemployment. Coupled with macroeconomic Economic growth, interrupted by the financial crisis, is expected to resume in Russia
world centres for at-
Monthly GDP growth acceler- stability this is likely to encour-
ated to 0.5pc in July from 0.1- age banks to increase lending to
tracting investment.
0.4pc in June and remained fl at companies. preserve the value of their rou-
The crisis should in August despite some decel- In addition, the government has ble savings. Activity in the serv-
Russia welcomes investors
not postpone the
eration in industrial produc- started to disburse state guaran- ices sector substantially picked
achievement of this
tion growth. As the latter was tees and plans to use 300bn rou- up in August, suggesting that On September 29, in Moscow, finance, Elvira Nabiullina, minis-
aim, but, on the con-
driven mostly by one-offs bles ($9.9bn) until the year-end. overall consumption has prob- VTB Capital is hosting the first ter for economic development,
trary, bring it closer’
(mainly the planned summer This is also likely to contribute ably started to recover. VTB RUSSIA CALLING Investment Fo- and other senior officials have
closure of Russian car produc- to credit growth in the fourth Capital’s Services PMI rose rum. The Forum is designed to confirmed their participation in
Prime Minister ers) GDP growth is most likely quarter of 2009. It’s also worth from 48.5 to 52.2 in August, promote portfolio and strate- the Forum.
Vladimir Putin to gather pace in September. posting the fi rst above 50 read- gic investment into Russia by The agenda for the remaining
Seasonally adjusted, industrial ing since September 2008. gathering together government two days includes a number of
‘The domestic market
output has been rising since ‘In July monthly invest- The government plans to spend representatives, shareholders, panel sessions with senior gov-
must be developed
May and increased 2.6pc in
ment growth (0.3pc)
about 1.5 trillion roubles in De- management of major Russian ernment officials, executives
and made more at-
May-July, according to the min-
– the first positive
cember (this compares to the corporations, international ex- of the Russian state and ma-
tractive than the for-
istry for the economy. VTB Cap-
number since the be-
average monthly expenditures ecutives and asset managers jor international corporations,
eign market so that our
ital's Russian Manufacturing of 701bn roubles this year) with from all over the world. as well as influential business
PMI also indicates that the pos- ginning of the crisis’
borrowers will want to
about 500bn roubles on a 36pc RUSSIA CALLING is one of the leaders in Russia.
itive trend in the manufactur- increase in pensions and other leading events for attracting in- The conference will bring to-
receive money on the
ing sector continues, as the out- benefi ts for pensioners. vestment to the Russian market, gether more than 300 Russian
domestic market’ put and new orders sub-indices noting that banks distributed The size of this stimulus is sim- which has remained on interna- and international investors, fea-
Deputy prime minister, climbed above the 50-no change about 430bn roubles of loans in ilar to the 650bn roubles ($27bn tional investors’ radar despite turing representatives from 150
finance minister mark in August. the summer months, falling at that time) that the govern- the state of global financial leading Russian companies, in-
Alexei Kudrin Capital investment has picked short just 70bn roubles from the ment spend from the Stabilisa- markets. RUSSIA CALLING is the cluding those already traded on
up probably on surging local 500bn roubles target set by tion Fund in November 2007 to first investment forum of inter- the Russian and international
‘If we all believe that
bond issuance and better avail- Prime Minister Vladimir Putin. save the banking system from national standing being held by stock markets, as well as non-
the global economy
ability of external funding in The Russian government itself the liquidity crunch. Remember a leading Russian financial in- public companies that have
is on the path to re-
the second quarter. In July might also refocus on invest- that the newly created govern- stitute. shown an interest in the securi-
monthly investment growth ment. The recent accident at the ment corporations (Rosnanote- Earlier, such kinds of forum ties market.
covery, this means
touched 0.3pc – the fi rst positive Sayano-Shushenskaya hydro ch, Housing Corporation, VEB) were held under the guidance VTB Capital, the Investment
that investors should number since the beginning of power plant (HPP) might act as got these funds as injection into of international banks only. Business of the VTB Group, is
be developing more
the crisis. Russian corporates an additional catalyst for mod- the capital and placed them on The Forum will run for three one of the key Russian invest-
of an appetite for risk
managed to place about 445bn ernisation of the outdated in- deposits in banks. Coupled with days. On the opening day, one ment business leaders. It enjoys
and investing in as-
roubles ($14.7bn) of local bond frastructure. If in the 2009 anti- higher oil prices and loose mon- of the plenary sessions will be the advantage of being able
this year, 26pc more than in crisis budget the government etary policy this stimulus led to attended and addressed by to use the platform and glo-
sets beyond the saf-
buoyant fi rst half of 2008. Cor- cut primarily capital expendi- more than 8pc year-on-year Vladimir Putin, Russia’s prime bal reach of the VTB Group, the
est and most liquid porate external debt increased tures in order to meet its social GDP growth in 1H08 and to a minister. Alexey Kudrin, deputy second largest financial group
ones. As investors
roughly by $20bn to $294bn in responsibilities, after the recent surge in infl ation. prime minister and minister of in Russia.
withdraw from safe
the second quarter leading to a accident the authorities decid- Declining unemployment and
havens such as treas-
rebound in capital investment. ed to revisit the country's larg- rising number of new vacancies
Credit growth would be an ac- est infrastructure projects . provides the ground for opti-
ury bonds and move
celerating power for the peak Consumption is also reviving as mism on consumer demand re-
into other, riskier as- up in investment. Interestingly, retail sales and services data in- vival. Unemployment peaked in
set classes the dollar
bank credit dropped less than dicate. Monthly retail sales have February at 9.5pc and has been
could weaken against
money supply: ie, in Russia we been fl at since May, passed the steadily declining to 8.1pc in
other currencies’
observe the opposite to what trough in February and fi nally August. While a part of that de-
happened in the developed advanced 0.1pc in August. In- cline was undoubtedly season-
First deputy chairman of countries (where central banks terestingly, rapid rouble deval- al, unemployment has most
the Central Bank of Russia had to pump in liquidity in uation likely pushed spending probably passed its peak and is
Alexei Ulyukayev order to prevent credit from higher in January as people to increase only marginally in
Source: RIA Novosti shrinking). One possible expla- rushed buy durable goods to the autumn.
-

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