NEWSLETTER                                RUSSIA                                  EDITION:  March  2017

1.

Main event

 

1.1. In Kyrgyzstan prime ministers from Eurasian economic Union (EEU) in the meeting of Eurasian intergovernmental Council reported that sought spheres of the economy, which could support the integration, they named about 300 items of goods and services (they should have the capacity of import substitution, growth of mutual trade or export). Inccluding the support of exports of agricultural machinery produced in the Union. PMs signed a dozen of documents, including the "Main directions of implementation of the digital agenda of the Union until 2025", the mentioned documents need to streamline management and reduce bureaucratic procedures. 1.2.The Russian business Week took place in Moscow with the participation of Vladimir Putin and the Union of Industrialists and Entrepreneurs and the Ministry of Finance, which made a statement about the impending oil and gas maneuver, and gave a lot of questions about future actions of the authorities. The Union intended to use the business Week as a platform to discuss the forthcoming government’s plan to boost the economy of the rate above the world average. Vladimir Putin expressed an idea of premature lighting plan in the media, explaining that while the government has no General solution, it’s not a right time to discuss widely options of reform planed by the Ministers. The Ministry of Finance announced its  proposals on tax maneuver: the contribution of social rate reduction from 30% to 22% and the increase in VAT from 18% to 22%. The Minister has warned businesses that this maneuver can trigger a one-time jump in inflation.

2.

 Sanctions and Consequences

 

2.1. Investment life insurance in 2016, as a year earlier, remained the driver of growth in the market of insurance services. According to a study conducted by rating Agency "Expert RA", the volume of premiums on investment life insurance in 2016 amounted to 120-130 billion rubles. Compared to the previous year this indicator increased more than by 2.5 times. For the last 4 years the segment has grown more than 8 times as in 2013 the figure was only 16 billion rubles In 2017  the growth rate of contributions can be about 50%. However, this year the low base effect is likely to be exhausted, in addition, the tightening of regulation is also possible. Because of this, the market growth rate will gradually fade.

3

Economic situation and investing.

 

3.1. The Emerging Portfolio Fund Research (EPFR)) informed,  amount of funds derived from the funds focused on Russia, for the past week amounted to $216 million. Over two weeks foreign investors withdrew from the funds of this category about $500 million, (44% from total amount of investments received from January to end of February). Aggressive withdrawal of investors associated with unfulfilled expectations of a rapprochement between the US and Russia, as well as the collapse in oil prices.  3.2.According to the Center for macroeconomic analysis, for an end of 2016 the number of bankruptcies of legal entities in the Russian economy fell by almost 3%, but still exceeded the pre-crisis level of 2013 by 15%. Despite the overall decrease in the number of bankruptcies in the 4-th quarter of 2016 grew in annual terms as it increased by 1%/.In January 2017 the number of bankrupted companies was eliminated as 1,05 thousand. The main reasons for the increase in the intensity of bankruptcies at the end of 2016 are as follows: termination of reduction in interest rates on loans; increase in overdue debt; the stagnation of fixed capital investment and protracted fall in real disposable incomes. At the end of 2016 the most noticeable drop in the number of bankruptcies  is marked in the electric power industry 21%, agriculture and forestry by 17.5% and in food production by 8.3%. In January 2017, the situation in the power sector has stabilized at pre-crisis level, and in agriculture and food production recorded new lows: 52 and 25 cases of bankruptcy, respectively.

4.

Economy’s forecast,  prices,currency rate

 

4.1. According to our estimates  the U.S. dollar this week will continue fluctuations in the boundaries 57,5–59,5 RUB/$, and we do not see the fundamental prerequisites for entering the U.S. currency over the lower bound of the range.                                                                                               

 

NEWSLETTER                              RUSSIA                               EDITION:  February 2017

1.

Main event

 

1.1. President Vladimir Putin held a meeting with the economic block of the government, where the Minister of economic development informed on a significant strengthening of the national currency (6%). He also said, now we need to follow up the course of the weakening of the national currency required to fill the hole in the budget, which is created due to the strong ruble and the decline in foreign exchange inflows from sales of exporters. Central Bank rejected the suggestion that the strengthening of the ruble caused by the inflow of speculative capital in Russia, the strengthening of the ruble in the beginning of the year has a short-term and is not associated with fundamental factors, the government is "just monitoring the situation". In the future the Ministry of economic development expects the weakening of the national currency with further stabilization.

2.

 Sanctions and Consequences

 

2.1. In March, Russia starts sending of container-trains with export supplies of agricultural industry products from the Russian European part to China. A price of rail transport is already close to the sea delivery price, but the railway wins at least twice at the time of delivery. Exports are constrained by high tariffs, including tarrifs in China. The Chinese market has a great potential, food import is one of the major areas: so in 2016 exports of meat products to China in monetary terms increased by 1.5%, fish-by 9.4%. Russia is increasing the export potential of agricultural products (while reducing the total exports in 2016 by 17% the export of agricultural products still increased by 5.2%).According to the Russian Export Center (REC) major share of foodstuffs carried by sea in gross exports from Russia to China makes frozen fish (about 3,44% of the total volume of exports, or 70% of the food) followed by soy beans, delivered by rail, then corn (but these products are under quotation and duty of 65%), vegetable oil, flour, rapeseed and malt beer. Experts consider honey, alcohol, pine nuts, mineral water, ice cream, baby food as promising products for export. In a list of export products "Russian Railways” corporation added meat, dairy products and confectionery.

2.1.On its February meeting the Russian Central Bank decided to keep a key rate at 10 %’ level. CB noted that annual inflation continues to decline in accordance with the plans and calculations. First of all it concerns the inflation in the market of nonfood products. The annual rate of consumer price growth dropped from 5.4% to 5.1%. According to the CB forecast, inflation will slow to the target level of 4 % by the end of 2017. The Bank of Russia also announced a growth of industrial production, including through import substitution.

3

Economic situation and investing.

 

3.1. Russian CB has started buying currency on the domestic market in the interests of the Ministry of Finance.The continuing interest in Russian assets from foreign investors, as well as seasonally higher export revenues allow the ruble to ignore negative factors. If last year  the CB bought daily up to $200 million for the Federal Treasury, then for the next month the amount of intervention is set at a level of 6.3 billion rubles a day (about $108 mln.)                                                                                                                                       3.2.Inspired by the strengthening of the Russian ruble, independent travelers began to return to popular before crises tourism destination but mostly they practice short trips. The number of bookings of long weekends for February and March showed a marked increase, but the share of tourists going overseas has exceeded already 50%. European countries form the most popular overseas destinations. The tourist flow of Russian citizens in Thailand is also increased, but if in past years Pattaya was the most popular place among Russian tourists travelling in Thailand, this year Phuket became the most desired resort for the Russians.

4.

Economy’s forecast,  prices, currency rate

 

4.1. Recent months, the Russian ruble continues to stay stable enough to the foreign exchange market, and the events of the end of the week can hardly  change this trend. We believe,  this week the dollar/ruble will be in the range of 58-59 rubles/dollar. but the main influence on the ruble exchange rate can give the external factors, such as dynamics of the oil market and the interest of global investors to the Russian market.

 

NEWSLETTER                                  RUSSIA                                EDITION:  January 2017

1.

Main event

 

1.1. Vladimir Putin has set the task to ensure the economic growth rate above the world average by no later than 2020 than puzzled officials and experts the question of how exactly this can be done. The Ministry of. Economic development created the government action plan for the 2017-2025 years, which shall be adopted by March. First Deputy Prime Minister Igor Shuvalov called an adequate level of tax burden and the rule of competition as the two main ideas for the economy after 2018. “Adequate burden” is a tax that will ensure all public expenditure, but will leave the entrepreneurs desire and incentive to earn. The second is competition,  he means a fair judicial and law enforcement system, which does not allow to use it as leverage against competitors. As for the growth with structural reforms to the economy may show growth above 3% in 2019 and 4% in 2022. The set of these changes: in particular, reform of the judiciary to protect the rights of owners, the decline in the share of government in the economy, restructuring of monopolies, raising the retirement age to solve the demographic problems and an increase in budget spending on education and health increase human capital.

2.

 Sanctions and Consequences

 

2.1. The Russian Ministers participated in the winter session of Davos world economic forum (WEF) noted that an interest in the assets and Russian economy was higher than expected. Some representatives of the largest American companies promised to submit proposals for the resumption of the business dialogue "Russia-USA", anticipating the establishment of political contacts with the new US administration at the economic issue. Pretty soon Russian authorities will receive proposals from the US companies in a  frame of passed consultations. Russian delegation noted, that around Russia there is a plenty of myths, one of which is to ensure that the country's economy suffered greatly as a result of sanctions. The facts show that it is not true, the sanctions have not achieved the objectives pursued, the US companies lost "tens of billions of dollars" of profit, and the EU companies too due to the failure of markets and the restructuring and increasing the effectiveness of a number of Russian industries under external pressure.

3

Economic situation and investing.

 

3.1. . In December last year, foreign investors invested in the Russian market about $240 million every week, the total investment inflow to the Russian funds has reached $200 million. The Russian stock market continues to hold the lead in attracting investment among all developing countries in General and BRIC in particular. Surprisingly, the funds investing to China became an outsider among emerging markets, in a week they lost about $550 million, and from the beginning of 2017 more than $650 million. The Indian funds were in red light too, the outflow of funds made more than  $220 million. 3.2. In the past year, the participants of the food market loudly discussed the latest amendments to the “Law on trade” created by the government to limit the appetite of retailers and reduce bonuses levied on producer by nets.The state Duma has limited a size of bonuses imposed by retailers from their suppliers up to 5%, which includes payment of all logistics services for preparing, processing, packaging of food etc. Previously, a size of the rebate for the purchase of a certain quantity of products accounted for 10% of the product’s price.The magnitude of other bonuses generally have not been regulated, now levies from suppliers should be reduced twice. But the first months of discussion of the application of the new Law on trade" shows, retailers have not lost their power, and suppliers are not acquired additional influence yet.

4.

Economy’s forecast,  prices, currency rate

 

4.1. Last year, the Russian ruble has completed the strongest the growth to the U.S. dollar in its history. According to Bloomberg, for the year 2016, the Russian currency strengthened against the dollar by more than 21%, breaking below the level in 61 rubles./$. So low the dollar war not traded in Russia since July 2015. As a result for the first time in nearly quarter-history the Russian ruble demonstrated the strongest growth the US dollar among all currencies. Most of the year the ruble followed the price of world oil market. In addition, the difference in rates for debt instruments in the domestic market and abroad supported the investors' interest in carry-trade. We believe that expectations of use of such capabilities maybe extended to the 1-st quarter 2017.

NEWSLETTER                                              RUSSIA                                  EDITION: December 2016

1.

Main event

 

1.1. The state Duma adopted in the final, third reading the law on the budget for the next 3 years. Financial plan of the country is conservative, calculated based on the forecasted price of oil at a level of $40/barrel for all the three years and the need to gradually reduce the budget’s deficit. The law assumes that the budget deficit will decline from the current 3.7% of GDP to 3.2% in 2017, to 2.2% of GDP in 2018, and up to 1.2% of GDP in 2019.  Basic parameters of the Treasury 2017 are as follows: the income: 13,488 trillion rubles, expenses: 16,241 trillion In 2018, the volume of budget revenues is at a level of 14,029 trillion rubles, expenses as much as 16.04 trillion in 2018 and 14,845 trillion in 2019. Deficit will be financed from the Reserve Fund and the National Welfare Fund.

2.

 Sanctions and Consequences

 

2.1. The EU decided to extend economic sanctions against Russia for another six months. Although the formal sanctions are not connected with the situation in Syria but EU leaders take into account of criticism of Russian actions in Aleppo. However, the administration of Donald Trump does not consider  to continue the foreign policy of the President Barack Obama. In Moscow the assistant to Mr. Trump Jack Kingston assured the American and Russian businessmen that the new US administration plans  to change the US course, which affects the sanctions policy.The removal of restrictive measures, according to Mr. Kingston, would update relations between the US and Russia, as well as improve the status of businessmen working in Russia

3

Economic situation and investing.

 

3.1. Russian President Vladimir Putin said at a meeting with members of the government that the situation in the Russian economy has stabilized, but it is early to talk about a fundamental improvement yet. The President noted a small increase in industrial production on 0.3% but agriculture added 3 %. He also marked the relatively low level of unemployment. The government is holding back inflation. From the beginning of the year it amounted to less than 5%. Vladimir Putin also urged to strive and keep the Federal budget deficit within the planned values – it should be not more than 3,7%. There are certain risks of a small increase, but still we need to keep it in the frame of the planed deficit but not more. Certain industries, such as  manufacturing, construction,  can't make a good growth, still we believe they have a chance for a growth..ondingly.                                                                                                        3.2 “Thai Airways” (TG) performed the first flight to Bangkok from Domodedovo airport (Moscow) after 1,5 year of the company’s escape from the Russian market. The closure of flight operations in Egypt and the pause in air communication with Turkey has caused a surge of Russian tourists’ interest in Thailand, which led to the return of “Thai Airways” on the Russian market. The carrier is in anticipation of the high season has started flights from Moscow sand hopes to stay in this area if it has a necessary demand. The airline will compete on the Bangkok direction with Aeroflot, and experts believe that in the season Thai Airways can win over a significant part of passengers traffic. TG plans to operate 4 flights/week from Moscow to Bangkok, the air company does not preclude the opening of flights to Phuket, but the decision depends on future behavior of the market.Compared to the 2015 number of pre-booking of tickets already increased by 10%, and from December to February, the flights will be operated with the download of almost 99%.

3.3. The largest Russian state oil company “Rosneft” sold 19.5% of its shares for $10.5 billion to a consortium of “Glencore” and “Qatar investment Fund”, a distribution of shares in the consortium between “Glencore” and Qataris will be 50 to 50. Among  the main contenders for the purchase of “Rosneft” shares were the Chinese company (National United Oil Corporation, Thailand’s corporation (PTT. Plc) , as well as two Indian companies. Successful privatization of “Rosneft” had a positive result

4.

Economy’s forecast,  prices,currency rate

 

4.1.The Russian currency  shows stability/The exchange of the US dollar fell below the level of 60,50 RUB/$, and sometimes is fixed above the level of 62 rubles/$. Thus, the ruble has repeated dynamics of the oil market, where prices first have risen up to $57.9/barrel, and then corrected to $53.2/barrel. We can expect,it will continue a growth with some strengthening of the dollar, and the exchange rate will be in the range of 61-62.5 RUB/$

 

  NEWSLETTER                                   RUSSIA                              EDITION: November 2016

1.

Main event

 

1.1. The state Duma adopted in the final, third reading the law on the budget for the next 3 years. Financial plan of the country is conservative, calculated based on the forecasted price of oil at a level of $40/barrel for all the three years and the need to gradually reduce the budget’s deficit. The law assumes that the budget deficit will decline from the current 3.7% of GDP to 3.2% in 2017, to 2.2% of GDP in 2018, and up to 1.2% of GDP in 2019.  Basic parameters of the Treasury 2017 are as follows: the income: 13,488 trillion rubles, expenses: 16,241 trillion In 2018, the volume of budget revenues is at a level of 14,029 trillion rubles, expenses as much as 16.04 trillion in 2018 and 14,845 trillion in 2019. Deficit will be financed from the Reserve Fund and the National Welfare Fund.

2.

 Sanctions and Consequences

 

2.1. The EU decided to extend economic sanctions against Russia for another six months. Although the formal sanctions are not connected with the situation in Syria but EU leaders take into account of criticism of Russian actions in Aleppo. However, the administration of Donald Trump does not consider  to continue the foreign policy of the President Barack Obama. In Moscow the assistant to Mr. Trump Jack Kingston assured the American and Russian businessmen that the new US administration plans  to change the US course, which affects the sanctions policy.The removal of restrictive measures, according to Mr. Kingston, would update relations between the US and Russia, as well as improve the status of businessmen working in Russia

3

Economic situation and investing.

 

3.1. Russian President Vladimir Putin said at a meeting with members of the government that the situation in the Russian economy has stabilized, but it is early to talk about a fundamental improvement yet. The President noted a small increase in industrial production on 0.3% but agriculture added 3 %. He also marked the relatively low level of unemployment. The government is holding back inflation. From the beginning of the year it amounted to less than 5%. Vladimir Putin also urged to strive and keep the Federal budget deficit within the planned values – it should be not more than 3,7%. There are certain risks of a small increase, but still we need to keep it in the frame of the planed deficit but not more. Certain industries, such as  manufacturing, construction,  can't make a good growth, still we believe they have a chance for a growth..ondingly.                                                                                                                     3.2 “Thai Airways” (TG) performed the first flight to Bangkok from Domodedovo airport (Moscow) after 1,5 year of the company’s escape from the Russian market. The closure of flight operations in Egypt and the pause in air communication with Turkey has caused a surge of Russian tourists’ interest in Thailand, which led to the return of “Thai Airways” on the Russian market. The carrier is in anticipation of the high season has started flights from Moscow sand hopes to stay in this area if it has a necessary demand. The airline will compete on the Bangkok direction with Aeroflot, and experts believe that in the season Thai Airways can win over a significant part of passengers traffic. TG plans to operate 4 flights/week from Moscow to Bangkok, the air company does not preclude the opening of flights to Phuket, but the decision depends on future behavior of the market.Compared to the 2015 number of pre-booking of tickets already increased by 10%, and from December to February, the flights will be operated with the download of almost 99%.

3.3. The largest Russian state oil company “Rosneft” sold 19.5% of its shares for $10.5 billion to a consortium of “Glencore” and “Qatar investment Fund”, a distribution of shares in the consortium between “Glencore” and Qataris will be 50 to 50. Among  the main contenders for the purchase of “Rosneft” shares were the Chinese company (National United Oil Corporation, Thailand’s corporation (PTT. Plc) , as well as two Indian companies. Successful privatization of “Rosneft” had a positive result

4.

Economy’s forecast,  prices,currency rate

 

4.1.The Russian currency  shows stability/The exchange of the US dollar fell below the level of 60,50 RUB/$, and sometimes is fixed above the level of 62 rubles/$. Thus, the ruble has repeated dynamics of the oil market, where prices first have risen up to $57.9/barrel, and then corrected to $53.2/barrel. We can expect,it will continue a growth with some strengthening of the dollar, and the exchange rate will be in the range of 61-62.5 RUB/$

                         

 NEWSLETTER                                                  RUSSIA                              EDITION:  October  2016. 

1.

International situation

 

1.1. A third of large countries-exporters of raw materials was in recession after a fall in oil prices, according to data of rating Agency ACRES (a share of raw materials in export of 35 countries is 40%, but in Russia it is about 63%). It happened with all the countries where the export of money was reduced by 50-60% (Azerbaijan, Kazakhstan, Iraq, Nigeria) as well as Russia and Kuwait, where the growth rate before the oil crisis was below 2%. Comparable with Russia the reduction of exports (about 50% in last two years) was noted in  Algeria, Bolivia, Colombia and Norway. The recovery of growth in the mentioned  economies will depend primarily on flexibility of the labor market, the speed of ‘adjustment’ of government spending and the dynamics of lending.

2.

 Main economic event

 

2.1 In recent years we experience the trend of a flow of physical gold from West to East. Since 2007, the share of gold in the reserves of the Central Bank of the Russian Federation has increased almost 4 times, from 402 to 1527 tons. The Bank of Russia in 2015, refused to buy foreign currency to replenish its international reserves in favor of purchasing gold and the volume of purchases in 2016 should reach about 200 tons of the precious metal, same as in 2015.Some developed Western countries such as the UK, France, Netherlands, actively selling their gold reserves, while buying the precious metal some Nations and peoples who understand the value of 2016 increased its gold reserves by 5 tons. As a result, according to the IMF, the total gold reserves of China amounted to 1838 tons.

2.2. By the end of 2016, the Federal budget may receive funds from privatization of some state companies in the amount of not less than 406 billion rubles, which is higher by 25 billion rubles than planned in amendments to the budget.  That is due to the fact that the amendments were not taken into account, for example, the expected proceeds from the payment of JSC AFK "System" shares of the company "Sistema Shyam Teleservices", payments shall be completed by December 15, 2016 in the amount of $116.5 million  ( equal to 7.6 billion rubles). In addition, as of October 14, 2016 the Federal budget shall receive revenues from the sale of shares "Bashneft", and this amount is estimated at 23.7 billion rubles. Thus, the total amount is made up of 329.7 billion, which is 7.7% more than was calculated in the amendment of the discussed budget..

3

Economic situation and investing.

 

3.1. Inflation tend in Russia in September 2016 slowed  up to 8.1% from 8.5% in August. Such information mentioned in the message of the Central Bank (CB). The Russian CB said, that if the current trends of prices and monetary aggregates can keep the same level, we expect a further gradual reduction of estimates of underlying inflation. The risks of deviation of inflation from the target at the end of 2017 is still possible.

3.2. Three companies within the "big four" auditors, KPMG, Ernst & Young and PWC, in the near future intend to leave up an SRO (Self-regulatory organization of auditors). The decision was made by members of the "big four" in concert, as between the "big four" there was signed an agreement on membership in the single SRO. he reason for the departure was that the SRO  was not able to protect its large member against claims of the Federal Treasury and to negotiate with the Federal Treasury (which checks auditors) on more soft sanctions against SRO member.

4.

Economy’s forecast,  prices,currency rate

 

4.1 Next week we will have to pay the main taxes in Russia, which will continue to support the national currency. At the same time, the block of important statistics in the USA (GDP for the third quarter, durable goods, indexes of business activity) shall be published, which may increase fears of imminent fed rate and play for strengthening of the dollar in the world, including in tandem with the ruble. If the cost of oil will be between $50-53.

4.2. The consensus forecast of 10 Russian banks of an exchamge rate for 28/10/2016 will be 62,75 RUB/Dollar

 

 

NEWSLETTER                        RUSSIA                       EDITION: September  2016

 

1.

Political situation

 

1.1. On 23.09.2016, the Russian election committee announced final results of elections to the state Duma (Federal Parliament)  of the7-th convocation. The voting turnout was pretty low as 48% compared to the last elections to Duma in 2011  but  (60%)   The party "United Russia" has received on elections more than 54% of the votes, earning 343 seats in the Parliament, the Communist party 35 sits, Liberal democratic party 34 and Fair Russia 6 sits. The Russian Parliament has 450 sits (PMs).

2.

 Sanctions and Consequences

 

2.1. It is already clear that Western sanctions against Russia, has exhausted itself , and thus neither the EU and the United States, nor Russia do not want to change their position but the situation can change after the US presidential elections (in November) or after the elections in France and Germany. Now the West realizes that sanctions have hurt European state, not less than Russia. Moreover, thanks to the sanctions and to the excellent harvest, Russia took the 1-st place in the grain trade in the world and its agriculture is booming.  2.2. On 23-rd September Moscow hosted the 1-st Moscow financial forum, where the Russian Finance Minister informed on  the main points of the Russian budget for 2017-2019. The cost of "three-year” planned to freeze on the level of this year (about 15.7 trillion rubles), which will reduce the budget deficit by 1% per year. Since welfare reductions are not subject to consider, the others in 2017-2019 will have to cut on 6%, 9% and 11%, respectively. The Minister of Finance announced that the government used a conservative approach to budgeting for all the 3 years of its parameters are determined based on the price of oil lower than $40 per barrel.

3

Economic situation and investing.

 

3.1. The 11-th summit of G20 in China became an important wvwnt of September, where the Russian President Putin became the VIP guest. During the summit Putin held constructive talks with the Chairman of China, Presidents of UA and France, Prime Ministers of Indonesia, Great Britain and Chancellor of Germany. The results of the G20 summit was deemed successful and fruitful.                      3.2. The II Eastern Economic Forum toop place in Vladivostok on 01/09/2016, it was attended by the delegation of Thailand. The TRCC member-“Sutech Engineering Co” was among the Forum’s  speakers. The first 100 agreements for 1.46 trillion rubles were signed at the 2-nd East economic forum in Vladivostok. Talking with the Forum’s participants, the Russian President Vladimir Putin reported on the growth of industrial production in Russia by 0.3%, while the growth in the Far East made 5%. Putin noted that Russia has set itself in the full sense of ambitious, huge-scale task - to make the Far East one of the centers of socio-economic development of the country, powerful, dynamic and advanced, this is one of our most important national priorities. Russia expects, that  about 200 agreements with a total amount of 1.7 trillion rubles will be signed in a frame of the Forum.                                      3.3. The Bank of Russia estimates, that net capital exports by the private sector in the first half of 2016, compared to the same period of 2015 was decreased by almost 5 times to $10.5 billion For the quarter it amounted to only $2.4 billion.

4.

Economy’s forecast,  prices,currency rate

 

4.1 In the forecast of socio-economic development of Russia for 2016 - 2019 the Ministry of economic development expects growth in food prices this year by 6.2 %. In 2016 we expect  slow down of the growth of he inflation rate exceeded by 1.2 times, Ministry of economic development expects to restrain the growth of prices  with a help of import substitution by domestic products, as a result of which the share of food imports in the trade turnover has decreased by almost 1.5 times and the impact of exchange rate dynamics in food inflation became much weaker. In the baseline forecast expects inflation this year at 6.5%, in 2017 about  4,9% in 2018  about 4.5%, in 2019  about 4%.                                                                                                                                 

4.2. In our view, the reduction of the key rate of the Central Bank, and the elections to the state Duma already considered by investors at current prices, so perhaps we are waiting for the volatility in the domestic foreign exchange market during the coming week.We expect that during the week the ruble will trade in a range 63,50–of 64.50 against the dollar

 

 NEWSLETTER                             RUSSIA                           EDITION:   August 2016

1.

Political situation

 

1.1 The meeting between the Russian President of the President of Turkey became the main political event of the month. The principal result of the negotiations is the beginning of the restoration of relations between the two countries after the incident with the Russian jet. Both Presidents agreed to resume the supply of Turkish goods to Russia, including fruits and vegetables, the resumption of the construction of the Turkish stream gas pipeline, the construction of a nuclear power plant and a renewal of Charter flights with Russian touriss to Turkish resorts and also a permission to work in the construction market the Russian Federation.

2.

 Sanctions and Consequences

 

2.1. The World Bank announced that in the case of the lifting of sanctions in 2017, Russia's GDP will grow by 2% and not 1.1%, as in the basic forecast (sanctions are abolished in 2017). But after  that the growth is limited without structural reforms. The geopolitical factor inhibits the growth of the economy: denies access to the capital markets, to technology, but it is unlikely the government will sacrifice its political principles for the sake of the economy.                                                                                                                            

3

Economic situation and investing.

 

3.1. Last 2 weeks investment funds focused on developing countries have raised the amount of money as much as $5,16 billion, which is a record for the last two years. The continued soft monetary policy of Central banks allows investors to take on more risk. Funds focused on Russia became a rare exception on this background due to increased geopolitical tensions they are losing money. According to the Emerging Portfolio Fund Research (EPFR), international investors are increasing their investment in emerging markets. Funds whose investment policies are focused on emerging markets (EM), raised $5,16 billion, which is four times bigger  than a week ago. This is a record figure for the two years, a larger amount of funds investors invested in such funds at the end of July 2014. Then on expectations of new stimulus from the Central banks of developed countries investors have invested in funds of developing countries $5.3 billion                                                                                                                                        

3.2. According to calculations of the Ministry of Finance, at a price of $40 per barrel, the budget revenues will gradually increase (from 13 trillion rubles in 2016 to 14.6 trillion in 2019): partly due to the transition of the economy to growth (of 0.8-2.2% of GDP); partly at the expense of improvement of tax administration (it is likely that some effect will be obtained from the transfer of administration of insurance contributions to the revenue; in part, perhaps, due to the attempts of the Ministry of Finance to compel state-owned companies to send dividends 50% of net profit according to IFRS or the company (whichever for some statements, the profit will be more), and partly from privatization; a large part of privatization’ deals (the proceeds from which the Treasury estimated at 0.8-1 trillion rubles) to be held in 2016. But S&P Global Ratings expressed doubts that these plans will be implemented as adopted for the basis scenario, the budget’ deficit will be gradually reduced up to 3.3% of GDP in 2016, 3.2% in 2017, 2.2% in 2018 and, finally to1.2% of GDP in 2019. Government needs to repay the gap from funds: the Reserve and National Welfare Fund by borrowing financial means. However, the Finance Ministry estimates, by the end of 2016, the Reserve Fund will have abour 980 billion rubles, and by the end of 2017 just about zero. So, the government can use NWF and loans only after 2017.

4.

Economy’s forecast,  prices,currency rate

 

4.1 The Bank of Russia estimates, net capital exports by the private sector in the 1-st half of 2016, compared to the comparable period of the previous year decreased by almost 5 times to $10.5 billion For the quarter it amounted to only $2.4 billion. rubles./$.

4.2. For 2015 food prices in Russia grew by 21% (with inflation at 15.5%), for the 1-st half of 2016 by another 6.5%. The serious decrease for the year is not expected. The analytical center for the government on employment, income and private consumption in 2016, the share of food in retail sales was 49.9%, which is actually equal to the non-food share.The report said, that  by world standardsit is a lot for a middle-income country. Experts believe,  by mid-year, the share of food in retail sales exceeded the share of non-food.

4.3. The consensus forecast of 10 Russian banks of an exchamge rate for 02/09/2016 will be 64,56 RUB/Dollar

 

  NEWSLETTER                             RUSSIA                                     EDITION:  July  2016

1.

Political situation

 

1.1. The main event of the month- Britain's decision to withdraw from the EU (Brexit) has stirred the whole world and foreign exchange market. The pound fell more than 10%, and Euro has dropped too. Investors do not want to face high-risk, placing funds in defensive assets. The Central banks of the major world powers announced that, if necessary, they will support banking system in the conditions of instability. Despite the fact that the procedure of the Kingdom's exit from the EU will be delayed for at least two years, investors expect volatility in the foreign exchange market. They are afraid of a chain reaction of other countries in the EU, calling among the new candidates for the exit such  countries as  Austria, Hungary, Netherlands, Finland, France. However, the outcome of the referendum in the UK is becoming less likely the fed rate hike in the United States. Against this background, the Russian currency lost a little in price, but holds firm, even amid falling of oil prices below $50/barrel.

2.

 Sanctions and Consequences

 

2.1. China did the sanctions imposed by the US and EU in 2014 against Russia senseless just by the fact that in this period China began to openly discuss new investment in Russia’s  projects. It became clear that China in the case can take a place of the West in our economy, as it did many times with other countries, against which unilateral sanctions ( not approved by UN) were impost. Need to mention that   China condemns sanctions, which once again was confirmed during the visit of the President Vladimir Putin to China a week ago. 2.2. Russia notes that the restrictive measures (EU sanctions) have a positive effect on the economy of the country, "which is adapting to the sanctions regime, reducing the financial, economic and technological dependence on the EU countries. In June the Russian President Vladimir Putin extended the food embargo against the countries that imposed sanctions against Russia. Domestic producers has been repeatedly made a number of requests for a preservation of the food embargo and noted that the ban on import of agricultural products from the EU significantly reduces competition and helps the development of local agricultural production.

3

Economic situation and investing.

 

3.1. Information for investors: the President Putin instructed several government departments to develop a new strategy of governance of the SEZ. Now, the regions will be transferred part of the operational management responsibilities of the SEZ. This is done in order to increase the speed of decision-making and responsibility of the regional authorities. All projects  continue to be Federal and all the benefits, all liabilities to resident remain in full, in which they were originally intended. SEZ residents receive benefits on insurance premiums, land tax and income tax are exempted for 5 -10% from the property tax. 3.2. The Russian Ministry of economic development                                                                                                                                                                                          reports that the average rate for the dollar in the 2-nd half of 2016 shall be 65.9 rubles/dollar. thus, in the second half of 2016 will continue the strengthening of the ruble. The position of the Russian currency was affected the outcome of the referendum on the British exit from the European Union, according to the Ministry, in addition, global stock markets have started to invest in riskier assets, including in the ruble, which led to its strengthening of it.

4.

Economy’s forecast,  prices,currency rate

 

4.1 Emerging currencies, including the Russian rubles kept positive dynamics. While this suggests that the strong data on the labor market in the United States, will not be a trigger for the growth of speculation about the possible tightening of the OST of the fed, and hence the commodity and risky assets remain attractive. The focus will be put on statistics on inflation and retail sales in the US and the EU, trade balance and industrial production in China. In the absence of adverse shocks (especially in  oil market), the ruble may continue to strengthen. 4.2. Oil is getting cheaper because of the oversaturation of the market, including from-for increases of supply by Iran, the fall in prices is happening despite the decrease in stocks of raw materials in the United States. The market's attention this week will also be confined to meetings of the U.S. Federal reserve and the Russian Central Bank, which will be held respectively on Wednesday and Friday. From the American regulator we expect a save of interest rates, meanwhile, the Central Bank may cut the rate by 0.5 % and it can provide a moderate pressure on the ruble.

 

  NEWSLETTER                                   RUSSIA                             EDITION:  June  2016

 

1.

Political situation

 

1.1. The International St. Petersburg Economic Forum became the main event of the week, it was attended by Prime Ministers of several countries,the UN Secretary General, Chairman of EU Council, the Russian President. Vladimir Putin  noted that Russia understood the new realities and would not like to show themselves on the forum as a supporter of business development in all its possible manifestations. He said that decisions will be made, including personnel, in relation to those heads of regions who do not understand that business is the most important resource for the development of the country. The world will soon be changed and would never be the same, and that the only way is to match this process.

2.

 Sanctions and Consequences

 

2.1. The World Bank announced that in the case of the lifting of sanctions in 2017, Russia's GDP will grow by 2% and not 1.1%, as in the basic forecast (sanctions are abolished in 2017). But after  that the growth is limited without structural reforms. The geopolitical factor inhibits the growth of the economy: denies access to the capital markets, to technology, but it is unlikely the government will sacrifice its political principles for the sake of the economy.                            2.2. The Central Bank of Russia informed that the Board of Directors has noticed the positive processes of stabilization of inflation in the country, reducing of inflation expectations and inflation risks". CB’ speaker said that this is happening against the background of "signs of the approaching entry of the economy into a phase of recovery growth, the Central Bank decided to lower its key interest rate up to 10.5%, which has led to a drop in lending rates in banks. According to the policy of the CB, a rate cut is possible only in the case of reducing of inflation risks. On 8th of June the Federal agency of the state statistics (Rosstat) informed that for the first time since mid-August 2015 the weekly inflation slowed to zero.

3

Economic situation and investing.

 

3.1. According to data Emerging Portfolio Fund Research (EPFR), foreign investors last week reduced investments in the Russian market. The total volume of investments, which was withdrawn from the stock market for the week ended on June 15-th through funds of global emerging markets and local Russian funds, reached the highest level since August 2015 and made $232 million, that is almost three times greater than the volume of investment in Russian stocks in the previous week (about $80 million). On this indicator the Russian funds have been among the outsiders among funds of BRICST countries (BRICS plus Turkey). More funds were derived only from China ($531 million), and from other developing countries, the outflow was at $17 million. Total loss of funds in emerging markets, according to EPFR, last week reached a $1.9 billion. High probability of a British exit from the EU is forcing investors to reduce investments in risky assets, primarily securities of companies in developing countries. Market participants do not rule out further outflow of investments from Russia and developing countries. In the case of real UK out of the EU assets in developing countries could fall more on 7-10%, and Russian assets will undergo approximately the same as the mentioned correction.

4.

Economy’s forecast,  prices,currency rate

 

4.1. National meat Association has informed that Russia for the period from January to April 2016 increased its volume of meat production by 13.5 % up to 792 000 tons, compared to the same period last year. According to data of the Federal Service of the state statistics, if such growth rates will continue, pretty soon Russia may face with a serious problem of oversupply. Over the last decade the share of imported meat in Russia fell from 40 % to 10 %, while the growth rate of the domestic meat industry made 4 times above the world growth. Since the market is alreadysaturated with pork, and poultry meat several Russian companies have requested the government to stop subsidizing the meat industry, since the permanent commissioning of new projects (related to meat production) is reflected in the price. Market participants advised the government to shift subsidies from farms’ constructions for  new infrastructure’s projects to support the construction of facilities for production of higher value products which  are required by animal husbandry. 4.2. We expect fluctuations in the pair dollar – ruble in the range of 65-67 rubles/dollar.                                                        

 

NEWSLETTER                                RUSSIA                                    EDITION:  May 2016

1.

Political situation

 

1.1. On May 17-20, 2016 the Government of Thailandin headed by PM  Prayut Chan-o-cha paid an official visit to Russia. The talks between PM Prayut Chan-o-cha and PM Dmitry Medvedev took place in St. Petersburg on May 18, where they discussed bilateral affairs and witness signing of the nine MoUs and four agreements. Besides, there was the successful business forum “Russia-Thailand”, which collected many Russian and Thai CEOs of business  companies. On May 19, 2016 PM Prayut Chan-o-cha met the Russian President Putin in Sochi, where theydiscussed prospects of developing bilateral ties in spheres: military and technical cooperation, trade and economy, mutual investments, science and technology, agriculture etc. PM Prayut said that he expected progressive talks with Medvedev on several aspects, including firmer trade agreements and deals on dual-use helicopters for military and civil tasks and also cooperation in agriculture .

2.

 Sanctions and Consequences

 

2.1. In the Summit” Russia-ASEAN” in Sochi Malaysia said, it wants to create a free trade zone with the Eurasian Economic Union (EAEU).There are ongoing talks with Singapore, Cambodia, Thailand and Indonesia, while the FTA have been  created between EAEU and Vietnam. Russia also offers other formats, such as possible participation of ASEAN countries in the mate economic belt "silk road" (China project) and the EAEC. Russia proposes cooperation on the principle of "trade plus". This refers to the development of transport and telecommunications, "infrastructure of contacts between people and business, as well as a free market access, simplification of customs procedures and regulations, creation of electronic document management system.

3

Economic situation and investing.

 

3.1. The IMF published a new forecast where it shows, Russia will start economic growth very soon. As for the Euro Union,  the IMF considers it position a much more skeptical. According to the IMF, the recession in Russia will soon come to an end and the country will come back to a  path of economic growth. As explained by the IMF in its semi-annual report for Central, Eastern and southern Europe, this year the economic situation in Russia will probably continue to be not the most favorable. However, next year we may see significant changes. Now the Russian economy is suffering due to low oil prices, and has done a great gap in the state Treasury, as well as by Western sanctions imposed in connection with the Ukrainian crisis. As reported by the IMF in the Eurozone it sees a "clear risk" of economic stagnation, despite the surprisingly goodstart of the year.                           3.2 According to the Russian Export Center (REC), the key partners of Russia among ASEAN countries  there are Singapore (with a trade turnover of $2.2 billion, 43% of non-oil exports in ASEAN) and Vietnam ($1.7 billion, 32%). Exports of manufactured goods from Russia in the ASEAN countries by the end of 2015 decreased by $2.5 billion (32.5% compared to 2014), up to $5.2 billion, the share of manufactured goods in total exports amounted to 81,2%. The bulk of exports was accounted for by fuel and energy goods ($2.2 billion, or 41% of total exports), machinery and technical goods ($1.9 billion, 36%) and chemical products ($0.7 billion, 13%).           .

4.

Economy’s forecast,  prices,currency rate

 

4.1. Last week, the ruble once again was marked by major movements of improvement, primarily due to oil price, which touched a level of $ 50 per barrel. In Russia the main tax payments in May  are over that provided support to the ruble.. We believe, next week's planned meeting of OPEC countries will not give an agreement on the limitation of oil supplies.Therefore, we do not exclude the continuation of the correction in the oil market, which may exert pressure on the ruble. We guess that next week the dollar will be in the  range of 65-67 rubles.                                                                 4.2.The consensus forecast of the Russian banks of exchange rate  on  03/06.2016 makes 66,65 rubles/dollar.

 NEWSLETTER                                 RUSSIA                              EDITION:  April  2016

 

1.

Political situation

 

1.1. Starting May 1, the entire Orthodox world celebrates the main holiday of the year —the  Easter. The Resurrection of Christ is celebrated in 68 countries of the world where there are communities and Orthodox churches. Before celebration of the main holiday of the Orthodox  we are preparing and thoroughly cleaning our homes and apartments, paint colorfully eggs, bake special Easter bread (a sweet cake), and cook a cheese treat in the form of a pyramid with symbols of the Easter holiday. Holiday meals we bring to temples to be blessed. The Easter is celebrated not only by  the Russians  but also  by  Easter community in more than 30 thousand Russian Orthodox churches, which are located in 68 countries of the world.

2.

 Sanctions and Consequences

 

2.1. Russia has achieved cancellation of the decision of Arbitration court of Hague on the suit of the former shareholders of YUKOS oil company in the case of the payment of a $ 50 billion. During the process in the supreme court of Hague, where Russia has filed an appeal, it was found that the Arbitral court did not have competence to consider claims of this kind. Russian lawyers provided the court with substantial evidence in the Yukos case. Thus about any politicization of the process and the question. The court's decision became the basis for a suspension of execution of the decision of the Arbitration  court in those countries, where the property of Russia was  already arrested.                                                                                                        2.2 The American magazine ”Time” has compiled a list of Top 100 most influential people in the world. In the category of "leaders" the list included the following names: Vladimir Putin, German Chancellor Angela Merkel, candidates in US presidents, Donald trump, Hillary Clinton and Bernie Sanders, U.S. President Barack Obama, French leader Orlland, President of Turkey Erdogan and the leader of North Korea.             

3

Economic situation and investing.

 

3.1. International company EY conducted a survey of 62 countries, as well as systematized and analyzed the data on the present level of corruption and concluded that the level of corruption in the U.S. is not less than in Russia. Almost 3 thousand respondents from 62 countries who participated in the survey confirmed the result: the highest level of corruption in the business environment observed in Brazil (90%), Ukraine (88%) and Thailand (86%), and lowest in Finland (0%), Saudi Arabia (4%) and Sweden (4%).                                                                                                             

3.2 According to a new forecast of the World Bank, in 2016, the decline of the Russian economy will be 1.9%. In 2017, WB projected  the Russian GDP growth at 1.1%", In the previous report of the World Bank was projected a  decline of GDP in 2016 only by 0.7% in 2017 by 1.5%. The forecast of the world oil price in 2016 coincides with its current level of $37 per barrel. In a previous report, WB also considered available, waiting in 2016 the price of oil at $53 per barrel. In the following years, the WB, like other centers of expertise, waiting for the growth of oil prices, noting that in Russia in the baseline scenario it is forecast that the poverty rate will rise from 13.4% (19.2 million people) in 2015 to 14.2% (20.3 million people) in 2016.                          3.3. After more than a month break, the international investors started to withdraw money from the Russian stock market. However, the outflow is small as $10 million only.. However, the recovery in oil prices that occurred in April, gives a hope for a speedy return of withdrawn investment;

4.

Economy’s forecast,  prices,currency rate

 

4.1. Just before the upcoming long weekend, the Russian currency shows its growth  due to the recovery of oil prices up to $ 44 per barrel of Brent by the end of the week. As far as the oil “Brent” slowly  goes to the level of $48 per barrel, the Ruble feels itself much stronger. Within  May holidays in Russia, which the country celebrates till 10/05/2016 we do not expect further weakening of the Ruble.Our forecast for upcoming  week for exchange rate males 64-65 rubles/Dollar.                                                                                                                                                                       4.2.The consensus forecast of the Russian banks of exchange rate  on  03.05.2016 makes 64,50 rubles/dollar.

NEWSLETTER                            RUSSIA                                     EDITION:  March  2016

 

1.

Political situation

 

1.1. The main and the most discussed in the world news of the week was the withdrawal of the core group of the Russian aerospace defense forces from Syria, as they have achieved significant success in the fight against ISIS terrorists and help greatly to restore peace in Syria. Legitimate President of Syria said that military and political support from friendly countries, primarily Russia effectively contributed to strengthening the steadfastness of the Syrians in the war against terrorism.

2.

 Sanctions and Consequences

 

2.1. Agency “Moody's”  notices that it plans to withdraw the national scale ratings on Russia, but not the international ratings assigned to Russian companies, this change does not affect the Ratings on the national scale are used as relative indicators of the relative creditworthiness of debt obligations and issuers within a country that allows market participants to better differentiate risks.The new Russian law "On the activities of credit rating agencies” puts into question the continued presence in Russia by international rating agencies, they are allowed to make ratings on a national scale only Russian legal entities. Branches of foreign companies in the awarding of the national rankings right lose, firms that have agreed to these rules do not have the right to revise or withdraw the ratings for political reasons. Experts say, the law was Russia's reaction to Western sanctions.                                2.2. Agency ”Fitch” downgraded its forecast for the Russian economy in 2016: instead of growth of 0.5 %, it expects a reduction of GDP on 1.5 %. Worsening of the forecast compared to the December 2015 “Fitch” justified the revision of the forecast of dynamics of oil prices in 2016. In its new forecast, the Fitch proceed from the average cost of Brent crude oil in 2016 as $ 35/barrel and $45 in 2017, ( previously it expected price growth to $45 in 2016 and $55 in 2017). The decline in oil prices will reduce corporate revenues of Russian companies and will force the government to reconsider its economic policy, while high interest rates and falling real wages will decrease consumption. But the Central Bank of Russia expects in 1-st quarter of 2016, Russia's GDP will fall by 0.3 %, in 2-nd second will be 0 growth in 3-rd an increase of 0.2−0.3 % (compared to the same quarters of 2015).

3

Economic situation and investing.

 

3.1. The Bank of Russia on 19/03/2016 refused to reduce the key rate remaining at 11% . Despite the fact that inflation is falling faster than expected by the Central Bank, analysts of Bank of Russia do not believe in the restoration of the oil market and offered focus on the average annual price of oil as $30/barrel. The main uncertainty, which does not allow the CB to lower the rate, is the unresolved question of the future budget deficit: de-facto to reduce the rate the CB from the lack of the decisions about the new budget in 2016 and the arrangements for fiscal policy in the years 2017-2019.  Soon lending rates may go down and without changing the rate of CB is due to spending of the National  Reserve Fund.by the Ministry of Finance 3.2. Data of EPFR  show, international investors began to invest in the Russian stock market. In first 2 weeks of March, foreign funds focused on Russia, recorded a net inflow of funds in the amount of $79.2 million. For previous six weeks international investors have invested in the Russian stock market of more than $142 million in Russian funds, which  confirms a  recovery of investor demand for assets in developing countries. According to EPFR, during the reporting period, customers of the funds whose investment policies are focused on emerging markets, have invested $1.7 billion.

4.

Economy’s forecast,  prices,currency rate

 

4.1. Russian currency strategists expect the strengthening of the ruble up to 63 -65 rubles against the dollar for several months. Against the Euro the ruble could strengthen up to 75 rubles.  4.2.The exchange rate of the Russian banks on  30.03.2016 makes 67,50 rubles/dollar.

 

NEWSLETTER                                                      RUSSIA                                 EDITION:  February  2016

1.

Political situation

 

1.1.  The presidents of Russia and the United States have agreed on a ceasefire in Syria since February 27.and to cooperate closely in settlement of the Syrian conflict, the issues of the Syrian settlement. Both stressed the importance of creating a United anti-terrorist front, with the elimination of double standards as it is said in the official message. In addition, the parties agreed to intensify cooperation through the diplomatic missions and other structures However, growing tensions in Turkey and the willingness to start a ground operation and possibly other coalition forces, will be significantly bind Russia & USA opportunities for air strikes..

2.

 Sanctions and Consequences

 

2.1. In the coming months the Minsk agreements on settling the situation in Ukraine can be made that will pave the way for the lifting of sanctions with Russia. This was announced at a session at the world economic forum in Davos by the US Secretary of state John Kerry.                                 

3

Economic situation and investing.

 

3.1. The Minister of economic development of Russia told about the situation in the economy and stated that inflation in Russia by the end of 2016 could reach 7-7,5%. It is big, but recently it was even high," said the Minister, calling inflation a problem we coped and will cope. "It's more complicated with economic growth, it requires more time and effort to recover, but, nevertheless, I hope that this year we are on this path also back. points of growth for the Russian economy include agriculture, manufacturing industry and science. The minister noted the decline in retail trade, which is, in his words, about 11%.  But the point of growth is there: our agriculture is 3.7 times increased financial results over the past year. Manufacturing, not energy, not oil industry, manufacturing industry increased by 2.9 times earnings and 15 times of chemical. And even, maybe, for someone to be amazing, research and development, science, has received 2.1 times more profit than last year..The causes of the decline in retail was explained  as high inflation and a decline in retail lending.                                                                                                                                  3.2. The largest Russian retailer chain “Magnit” has disclosed operating results for the year of 2015.Revenue of  "Magnet" in 2015 compared with the previous year increased by 24.3% to 947,8 billion rubles according to the company’s  report. This is the lowest increase the company's revenue for the last ten years, when the retailer discloses its indicators, as in the 2008-2009 crisis the company reported much better  results. For example, in 2009, the retailer increased revenues by 28.1% to EUR 169.6 billion rubles. Other public retailers have not yet reported for 2015. According to the forecasts of "VTB Capital" agency, the 2-nd in terms of revenue Russian retailer X5 Retail Group ("Pyaterochka", "Perekrestok", "Karusel") had to show revenue growth at 28%, "O'key" net by 5%. According to forecasts of companies, the revenues of GC "Dixie" in 2015 should grow by 16-20%, “Lenta” retailer net by 29-33%..

4.

Economy’s forecast,  prices,currency rate

 

4.1 The Russian Ministry of economic development has developed a new version of the socio-economic forecast, the parameters of which can form the basis of amendments to the budget.
The forecast says that GDP will decline by 0.8% against the expected growth of 0.7%, average annual exchange rate of the ruble/dollar will be amount 68.2 RBL/$, the price of Urals crude oil will be $ 40, inflation around 8.5%, and the outflow of capital approximately $ 50 billion. According to Ministry's estimates, real wages will be reduced not on the previously expected by 0.2% but by 3.5%. Incomes will also be reduced by 4% instead of previously forecasted as 0.7%, unemployment will rise to 6.3% instead of the previously projected 5.8 %. In addition, the Ministry’s forecast says, the expected economy’s growth by 0.6%, is corrected  to  0.4%. From the new calculations it follows that consumers’ consumption will be reduced by 2.5% instead of expected growth on 0.4%, while investment will continue to decline by 5%.                                                                                                              4.2.
The forecast of the exchange rate  on 02/03/.2016 makes 77 rubles/dollar.

NEWSLETTER                                               RUSSIA                                          EDITION:  January  2016

1.

Political situation

 

1.1.  At the VII Economic Gaidar’s  forum the participants of the forum made a lot of disappointing forecasts and opinions concerning the present situation and future of Russian and global economy amid falling oil prices below $ 30 per barrel and also discussed  the state of the Russian economy on the topic "Russia in crisis: political risk in 2016. U.S. experts noted that an important trend of 2016 will be the relationship in the triangle USA-Russia-China. Sanctions against Russia will last at least until mid-2016 and will depend on the implementation of the Minsk agreements on Ukraine.

2.

 Sanctions and Consequences

 

2.1. American experts claim (the edition “Foreign Affairs”) that Russia managed to avoid a deep crisis, having released ruble in free swimming. The government has targeted reduction in the state budget while granting fiscal incentives. Even with the persistence of low oil prices, the IMF expects some growth to return in the Russian economy in 2016, although very small.                                                                                                                                    2.2. Bloomberg” news agency reported that futures’ trading American hedge funds and other large speculators for the first time since the beginning of 2016 put on the strengthening of the Russian currency, According to data on 19-th January, there were concluded 651 long futures’ contract to buy rubles against 657 short positions in the preceding five days. American experts believe that it is profit taking after a huge decline, not a turnaround in sentiment.

3

Economic situation and investing.

 

3.1. "Russian session" at the international Davos economic Forum was devoted to the Russian crisis.In 2016, the ongoing Russia-Ukraine conflict will remain the main negative factor for the post-Soviet space. Execution of Minsk agreements is desirable, but the most that we should expect, is the extension of the term of their implementation, to the Ukraine ceased to shed blood .Deputy Prime Minister Yuri Trutnev spoke about the current situation as a time for reform, touts potential investors together with fallen ruble costs and have noted a positive effect from anti-Russian sanctions. The main content of the reforms of the Russian government sees to create the most competitive environment for business. In support of this thesis he cited data of the world Bank's “Doing Business in Russia” report, which in one year has moved Russia up by 69 places. According to him, sanctions against Russia have led only to the fact that the level of support of the government and the President has increased significantly in Russia. The ruble’s depreciation is advantageous for foreign investors as it will reduce their costs if they decide to invest in Russia.                                                            3.2. Now the Russian government is developing a clear plan of action in the present crisis. In addition, the Ministry of Finance assured that all social obligations will definitely be fulfilled. On the second plan the government support of key industries that will propel the country's GDP, the economy based not on raw materials.

4.

Economy’s forecast,  prices, currency rate

 

4.1. The Russian Central Banks decision  to fix the same key rate had virtually no effect on the market. The market will continue to discuss the prospects of a meeting of OPEC and Russia, so oil can continue to trade above US $ 30, that will allow the dollar to stay below 80 rubles. On the last week Brent oil was trading for $33 and even $35/ barrel, which caused the withdrawal of the US dollar in the range 75 -78 rubles. We believe that oil prices will stay in the $ 35-40 range/barrel and it can form the exchange rate as 74 - 76 rubles/dollar. After strengthening of the ruble, we expect consolidation of the market and a slight ruble’s weakening up to 78 rubles/dollar.                                                                                                4.2.The consensus forecast of 10 Russian banks on the  exchange rate  on 05.02.2016 makes 79,07 rubles/dollar.

NEWSLETTER                                            RUSSIA                                 EDITION:  December 2015

1.
Political situation
 
1.1. The press conference of Vladimir Putin became a highlight of December, where  he delivered clarifications of the Russian positions on international issues and  informed that the country has passed a bottom of crisis and  its economy is growing up for the first time this year it  has shown modest positive results. so agriculture has given a growth of  3%, the growth in the industry was smaller  0.2%, total GDP growth in the September-October made 0,3% . For the first time this year the economy experiences a capital inflow, the inflow of foreign investment. This year the country harvested a very rich crop of grain - 103, 4 million tons.
2.
 Sanctions and Consequences
 
2.1. The European Union decided to extend sectoral sanctions against Russia for another six months, until 31-st July, 2016. The basis for the extension ofsanctions  was the failure of the Ukraine and Donbass rebelsto settle down a peace in the area.  If in six months the peace’ plan will not be implemented for further extension of the EU sanctions will be under a question.                                                            2.2. After the introduction of the ban on tours to Egypt and Turkey, the Russians became more active to purchase tickets to the UAE,Thailand, India and Vietnam. According to the Association of tour operators of Russia, the demand for tours in the UAE for the last weeks has increased by 20 %, in Thailand by 10-15% in India and Vietnam by 5%,
3
Economic situation and investing.
 
3.1. According to the Central Bank statement, Russia experoienecs an end of the most acute phase of the economic downturn. In the 3-rd quarter decline in GDP in annual terms was not as streporong as in the 2-nd  quarter. Overall for 2015, according to the Russian CB  estimates that GDP will fall by 3.7%. Too early to talk about  the formation of stable positive as major economic indicators give a mixed picture,  spot improvements, but the basis for recovery and sustainable growth in the medium term has not yet emerged. In 2016  the Russian economy’s adaptation  to the new conditions will continue its growth, GDP growth will be 0.5–1%.          3.2.The Moody's upgraded the forecast of credit rating of Russia to "stable", confirming that rating remains at Ba1. The Agency noted that the negative impact of sanction on the Russian economy and low oil prices has not been as strong as expected. The experts of Moody's noted that the Russian economy is highly dependent on movements in oil prices, which limits the fiscal capacity of the government.
4.
Economy’s forecast,  prices,currency rate
 
4.1.During last five years volume of black caviar has fallen by half  despite the world production has doubled, Russian production is increased in three times but the demand is growing too and  caviar’s volume, apparently, will continue to decrease, Recent years, China has become the world's largest producers of black caviar, followed by Iran,Russia, USA and Israel, which produces 6.5 tons of black caviar (f.e. about 30% of this elite  product is consumed  by  passengers of  business class of different airlines). Experts confirm, black caviar will never be cheaper as it is very expensive to manufacture and the margins in this market are low. After the ban on sturgeon fishing in the Caspian sea producers have switched from fishing to the more costly method of caviar production  in fish farms. Russian-Thai company “Thai-Sturgeon Farm” owns the sturgeon farm in Hua Hin  started to supply black caviar in leading hotels and restaurants of Thailandthrough its daughter- “Caviar House”, which is the only one company authorised to use this famous band in Thailand for its  top quality elite products.                         4.2. Last weekweexperienced some improvement of the Russian ruble  when it was drading for 68--69 RBL/$. The stable geopolitical situation and temporary growth of oil prices catalyzed big  Russian companies-exporters to sell currency on the stock market. However, the situation  started is changed and we expects the exchange rate at next week as much as 70-72 RBL/$

NEWSLETTER                         RUSSIA                               EDITION:    November  2015
1.
Political situation
 
1.1.  The most published event of the month became an aggressive accident of Turkey, which  shot down  the Russian jet on Syria’s territory and also a terrorist’s explosion on the Russian passenger plane over Egypt. In the first case the Russian pilot was fired off by IG under Syria’s sky, as for Egiptian terrorists’ explosion, it leaded to a death of 224 people.            1.2.At the  Asia-Pacific economic cooperation Forum the ASEAN leaders signed the final Declaration, which reflected the economic and financial issues, but also condemned the terrorist attacks of the Russian Airbus in Egypt and attacks in Paris and Beirut. Russian   Prime Minister had  a privet meeting with Prime Minister of Thailand, where they discussed a topic to encouraged the flow of Russian tourists to Thailand
2.
 Sanctions and Consequences
 
2.1. From  November20, 2015  Russia put into effecta  ban for tourism to Egypt followed by the the same ban for travelling to Turkey. From November 30-th Russia imposed embargo on all products from Turkey and cancelled all agrements and cooperation with Turkey.          2.2. From the beginning of the year export losses of the Western countries because of sanctions amounted to €2.2 billion but  by the end of 2015 will amount to €3 billion,                2.3. Prime Minister Dmitry Medvedev said, Russia is ready to cancel the food embargo imposed on Western countries, if the EU in return is ready to  remove its  sanctions in return. However, he admitted that for individual countries or companies, this decision may be revised.as  the issue of sanctions was maintained previously until the fighting with the terrorist group "Islamic state" (IS, which is  banned in Russia) became the top issue for Russia)..                                                     
3
Economic situation and investing.
 
3.1. In the ‘Doing Business 2015’  rating of Russia has risen to 51-st place. This rating was initially interesting to us because it measures the time, cost and number of procedures and does not operate with abstract things. On the other hand, the fact that the methodology is changing, suggests that Russia is really  doing something for improvement. After review by the World Bank (WB) methodology for rating and adding of qualitative indicators it turned out that last year Russia was at the 54-th, the current year it takes 51-st place.                            3.2. Investors are attracted by the cheapness of Russian assets in comparison with assets of other developing countries. Compared to other developing countries at the moment, Russian assets look attractive due to the stability of oil prices, which has not declined, even amid record for the last 6 months of growth of commercial oil reserves in the USA, sustainable ceasefire in the Donbas and the relative stability of the Russian currency.
4.
Economy’s forecast,  prices,currency rate
 
4.1. The IMF predicts that by the end of 2015 the share of investment in Russia's GDP will decrease up to 18.7%, and in 2016-2017 will not exceed 18.1%. Secondly, the existing structure of investments only reinforces doubts about the possibility of upgrading. In recent years the focus of investment activity has shifted towards extraction industries, although ten years ago the treatment and processing had a large share in gross investment"                          4.2. Geopoliticshasagaincometotheforethatdirectlyaffectedthecurrencymarket. However, we believe that the incident between Turkey and Russia will lead to further escalation of the conflict. Moreover, most retaliatory economic sanctions can be positive for the balance of payments and the Russian  ruble, respectively.  In the coming week the FX market will closely follow how far will go  the Russia’s conflict with Turkey, as well as its attention can be attraced to regular meeting of the OPEC cartel on 4 December. Our forecast on US dollar for next week is  between  65-67 rubles due to the increased risk. 4.3.The consensus forecast of 8 Russian banks of an exchange rate  for 30.11.2015 makes 66.36 rubles/dollar.

 

NEWSLETTER                         RUSSIA                                 EDITION:     October   2015

1.

Political situation

 

1.1. At the request of the legitimate President of Syria, Russia has moved its military space forces in Syria for a real fight against ISIL. Russia warned the US that they have to remove their advisers and instructors from  the territory of ISIS in Syria as areas of the potential bombing. The Americans confirmed that no one but the terrorists are over there.    According to the Syrian government, the success of the fight against ISIS, which was  made by Russia for 3 weeks exceeded the annual results of the bombing carried out by a coalition of the EU &USA coalition results. Since the beginning of military operation in Syria Russia fulfilled almost 1 thousand sorties,  the actions of the military space forces of Russia were destroyed 819 objects of ISIS terrorists..                                                                                1.2. Last month wase marked by the easing of geopolitical tensions over Ukraine. That became possible after negotiations of the  "Norman Quartet" leaders, which had reaffirmed the commitment of the Minsk’ agreements. Besides, the conflicting parties signed the agreement on the withdrawal of weapons, have intensified discussion regarding the changes in Ukrainian legislation required.

2.

 Sanctions and Consequences

 

2.1. The deterioration of the situation in the Russian economy and the sanctions did not lead  to the fall of positions in ranking of competitiveness of world economic forum in Davos: during the year Russia has risen from 53-rd to 45-th place. However, improvements for the most problematic indicators, mainly related to the quality of the institutional environment, while minimal, increasing the rating of the drafters explain the revision of the methodology of calculation..                                                                      

3

Economic situation and investing.

 

3.1. According to the Bank of Russia, the inflow of capital into the country in the third quarter of the current year amounted to $5.3 billion.In General, the return movement of capital is much stronger: for the first 9 months it amounted to an outflow of $45 billion. In total, in 2015  an outflow  will make approximately $85 billion.                                           3.2. EPFR data show that international investors increased investment in the Russian stock market faster than they picked them up. For the week ending 14-th October, foreign funds focused on Russia, recorded a net inflow of funds in the amount of $34 million in three weeks, international investors have invested in the Russian stock market almost $200 million.                            

4.

Economy’s forecast,  prices,currency rate

 

4.1. The Central Bank of Russia made a statement that the economy will move into positive territory, by the end of next year. if measured quarter to quarter. But overall, the annual rate, according to CB’s forecasts, will be negative up to - 1%", If the price of oil will stay above $ 50 per barrel, the Russian economy may move to a growth before. In addition, the Central Bank will continue its policy of tightening supervision in the banking sector.                             4.2 This week the dynamics of the ruble will be more similar to the dynamics of other currencies of developing countries. A key factor in the stability of the Russian currency is oil, which is more than two weeks traded in the corridor between 47 to 50 dollars/barrel. Our long term forecast assumes stabilisation of oil near $ 50 per barrel while reducing the number of rigs of oil production in the US. This forecast assumes no increase in the pressure on the ruble We expect moderately positive dynamics of the rouble. According to our forecasts, next week we will be watching an attempted breakout of the dollar against the ruble below level 61 rubles, while the Euro will trade below 70 rubles.                                     The consensus forecast of the Russian banks:  an exchange rate on 30.10.2015 makes 62,50 rubles/dollar.

 

 NEWSLETTER                          RUSSIA                           EDITION:   September  2015

1.

Political situation

 

1.1 Washington is configured on the negotiation process for a political solution to the Syrian conflict, calling on Russia and Iran to mediate in the dialogue with President Bashar Assad. While the U.S. has not officially require immediate withdrawal of the Syrian leader, follows from the statements of the head of the state Department John Kerry. The parties ' positions on Syria begin to converge, however the policy for cooperation with Russia may not support all the representatives of the American elite.                                                                                  

2.

 Sanctions and Consequences

 

2.1. German experts say that sanctions play into the hands of Russian agriculture (source German edition “Die Zeit”).  The ban on the import of Western food helps the Russian agricultural sector. For example, before sanctions,  it was incredibly difficult  for  Russian goods to break into the stores “Metro” (owned by the German branch of (”Cash and Carry”). There was the so-called entrance fee, and the goods were paid often only two or three months  later. Meanwhile, “Metro” is actively looking for Russian suppliers. The company is even willing to finance the development of new products, so despite some difficulties, many companies in Russia go to the next level of development.

3

Economic situation and investing.

 

3.1. On September 3-5-th  Vladivostok hold the  East Economic Forum, attended by about 9000 participants, mostly from the APEC countries. Immediately after a business trip to China, on September 4-rd, Vladimir Putin took part in the Forum in Vladivostok, where he assessed the situation with price shocks for oil. According to him, the Russian economy continues to operate in conditions of unstable prices of crude oil, despite the fact that the world economy is not stable, but it does not depend on us, it depends on the processes taking place in the global economy as a whole and  the Asian markets too.                                          3.2.According to the Russian Finance Ministry, in the first half 2015 the Federal  budget received 6.2 trillion rubles of revenue. Including:  tax  3.6 trillion rubles, customs fees 2.3 trillion rubles. However, we must remember that one of the major taxes is the tax on mineral extraction, but from 1-st January 2015, in accordance with the tax maneuver, the weight of the fiscal burden for the oil companies is shifting from customs duties on mineral extraction tax..

3.3. On last month 2015 aggregate amount of the Reserve Fund of Russia amounted to $ 4.3 trillion rubles, the National welfare Fund made 4.4 trillion rubles.

4.

Economy’s forecast,  prices, currency rate

 

4.1 There are factors that will contribute to the surge in gold prices in the coming months. The collapse of paper money and asset markets will be the main trigger for the growth of gold. But the dilemma is that there is very little physical gold available in the West. Continuous purchase of gold stocks by the  East has almost exhausted the reserves of gold in the West. This year, China likely will buy 2 000 tons and 1 000 tons India plans to buy too.  This is in the amount of 3 000 tons for these two countries. Although, as we know, the annual production of the mines is only 2 500 tons. We don't think, the Western Central banks have half of 23 000 tons, which they officially declare, and banks certainly keep less gold bars in stocks than the number of gold in inventory reports.                                          4.2. On 11-th September  the Bank of Russia at its meeting  made a  decision to keep the key  at 11%  unchanged. Probably, persistent inflationary pressures will  not help to  reduce the rate to end 2015. After an active intervention in the stock market Chinese Central bank stabilized the situation on Asian markets. The volatility of the oil market is shrinking with the same 5-8% 3-4% per day. All these factors influence the fluctuations of the Russian currency ruble, which is consolidating near the mark 65-67 rubles/$.. We believe, that the rate increase could lead to a rally in all emerging markets, including Russian, where we do not  excluded short-term strengthening of the ruble.The consensus forecast of the Russian banks of an exchange rate  for the coming week makes 65,70 rubles/dollar.

 

NEWSLETTER                                    RUSSIA                                 EDITION: August 2015 

1.

Political situation

 

1.1 Ceasefire in the Donbass can actually be considered as ripped off – the Ukrainian junta and rebels of the People's republic of Donetsk and Lugansk again exchanged accusations of aggravation of the situation on the demarcation line and the actual failure of the Minsk peace agreements . According to both sides, at least 15 settlements  had suffered bombardments  There are victims among the civilian population. Definitely, the USA and Ukraine will try to blame Russia as usual dispite of military attacks from Ukrainian sites. Definitely, such news significantly worsen the political climate and stability in Europe.The meeting of France and Germany’s leaders with the Ukrainian president in Berlin did not bring any positive results.

2.

 Sanctions and Consequences

 

2.1. The present situation with losing value of Russian ruble and failing Thai Baht diminishes hopes for business renaissance between two countries. According to the Russian statistics export in Thailand first half of the year came crushing down on 40% compare to the same period of the last year. We  lost some numbers in our countries trade, and in Russian export in particular mainly because of  falling prices for crude oil and oil products but  we enjoy unbelievable  increase of Russian export in Thailand of transport vehicles, it jumped up in 48 times, eye-watering amount of Russian electrical equipment, including engines and  pumps sale to Thailand is higher in 7,7 times than last year, power equipment in 3,5 times more, fertilizer and non-ferrous metals’  supply  is  much larger than we would expect.                            2.2. According to the Financial Times, Russia and Western companies, more than a year working in the conditions of sanctions against Russia, adapted to bypass the restrictions.  Many managers of foreign and Russian companies "were in a state of shock" because of the imposed sanctions. But a year later, the companies learned to find loopholes in order to circumvent restrictions in the supply of dual-use goods from the US and the EU and raise capital in Western banks. Western companies are converting exports to Russia, sending its transit through third countries that did not join the sanctions against Russia, for example, Turkey and Brazil. In addition, European and American companies have begun to place orders for Russian companies in third countries to circumvent a ban on the supply of dual-use goo                                                                                                                 

3

Economic situation and investing.

 

3.1 According to the forecast of the Russian Central Bank, the slowdown in consumer prices growth will continue in the conditions of weak domestic demand. Annual inflation in July 2016 was less than 7% and will reach the target level of 4% in 2017. However implementation of the state anti-crisis measures. can provide some support for investment. Weak investment and consumer activity will result in lower demand for imports.                                                         3.2. Investing in Russia funds again showed the worst result of the week in the CEEMEA region (Central and Eastern Europe, Middle East and Africa). Total outflows from the funds of the CEEMEA amounted to 0.3 billion for the week, or 0.3% of assets under management. The MSCI Russia index fell for the week by 4.2%, barometer emerging markets MSCI EM has dropped 2.4%, while futures for Brent oil fell during this time is 5.3%. Investors continue to withdraw funds not only from Russia but also from emerging markets in general. China is a leader with more than 64% of the outflow from Chinese funds,recorded in the previous weeks.

4.

Economy’s forecast,  prices, currency rate

 

4.1 According to estimation of the Russian ministry of economic development, the total volume of oil and gas revenues in the first half of 2015 , which came in the Federal budget made almost 3 trillion rubles, that is 48 % of total revenues, and last year in the same period  the oil and gas sector has delivered  almost 52 % of revenues . That means, in Russia the dependence on oil and gas is reduced slowly, but still reduced.                                                                                                                                             4.2.Consensus forecast of the Russian banks’s currency rate  for a period of September 4-th, 2015 makes  67,56RBL/Dollar.

 

 

NEWSLETTER                                               RUSSIA                                  EDITION:  July 2015

1.

Political situation

 

1.1 The main event of the month is the summit of  the SCO (Shanghai Cooperation Organization) member –states: Russia, Kazakhstan, China, Kyrgyzstan, Tajikistan and Uzbekistanand BRICS in  Ufa, Russia  on 10/07/2015.The member countires were joined by the heads of five countries- observers (Mongolia, India, Iran, Pakistan and Afghanistan). In addition, to the summit members there were representatives of international organizations — the UN, CIS, CSTO, CICA and ASEAN, as well as leaders of the Business Council and the SCO Interbank Association. India and Pakistan, since independence, are the main contenders in the region, they start the procedure of accession to the rights of full members. Besides India and Pakistan, four countries received the new status in the SCO. Armenia, Azerbaijan, Cambodia and Nepal became dialogue’s partners. Iran became one more potential member of the SCO.

2.

 Sanctions and Consequences

 

2.1. According to The Wall Street Journal,  Russia and the West has defined "status quo" on the issue of bilateral sanctions, which they will follow in the near future , talking about the balance on the issue of sanctions and anti-sanctions. And this balance will be maintained, it is the consensus, then there will be maintained a certain status quo. Anti-sanctions will not be extended or shortened.                                                                                                                

3

Economic situation and investing.

 

3.1 Important economic news in July have been delivered by the 6-th intergovernmental commission on bilateral cooperation between Russia and Thailand, which took place in Moscow on 15-th July, 2015. The Russian side  was headed by the Minister of Industry and Trade of the Russian Federation  Denis Manturov  and the Thai side by Deputy Prime Minister and Minister of Foreign Affairs of the Kingdom of Thailand Tanasak Patimapragorn. The Commission discussed a wide range of issues of mutual interest in an atmosphere of friendship and mutual understanding. Both countries noted necessary steps in signing 17 agreements on cooperation of different spheres including trade, energy, agriculture,rail roads, construction, tourism, education , culture, ecology, sport  etc 

3.2. According to EPFR, last week, international investors did withdrew from the Russian market of shares on $26.2 million,  in the last 9 weeks withdrawal from Russia amounted to $455,2 million but overall for the week the withdrawal of investors from emerging markets has sloweddown. During the reporting period, funds whose investment policies are focused on emerging markets, lost $3.3 billion, which is twice less of amount of funds withdrawn a week earlier. With more than 80% of the outflow had on Chinese funds.

4.

Economy’s forecast,  prices, currency rate

 

4.1 Central Bank of Russia has published the "Report on monetary policy", in which it is predicted that inflation in Russia in 2015 will amount to 10.8%. In the report of the Central Bank stated that by the end of the year inflation will slow down to 10-11% by June 2016 this figure falls below 7 %, and by 2017 will reach 4 %. The inflation rate depends on the scenario with oil prices).                                                                                                                                 4.2. According to Reuters agency, the weakening of the ruble last week occurred because of decrease in oil prices, the price of Russian Urals crude oil fell to $53,5 per barrel, the price of North sea Brent oil fell to $54,75. Data on oil reserves in the United State also contributed negatively on this drop. The Ministry of energy unexpectedly, while  analysts from Bloomberg had expected a fall of 2.2 million barrels. On top of it the weak economic data from China have had an additional pressure on the price of oil due to China is the largest consumer of oil, accounting for 3.6 billion barrels a year, so the deterioration of the economy could lead to a significant reduction in demand for raw materials.Next week  we expect the  exchange rate of US Dollar to Ruble about 58 rubles/dollar.

 

 

NEWSLETTER                                               RUSSIA                               EDITION:  June   2015

1.

Political situation

 

1.1 4 The news agency ”Vesti” informed about  a new compromise solution to the problem of Donbas,( Ukraine) which Russia delivered to the Ukrainian government. The essence of this proposal is that a special regime of local government must be applied to the entire territory of Luhansk and Donetsk regions (including controlled by Ukraine), but the authority of this autonomy shall be given to  the people, approved  by Kiev and Moscow, as well as Germany and France. In this case, all members of the armed forces of rebels  are amnestied, some of them convert to "people's militia", the rest are being disarmed.                                        .

2.

 Sanctions and Consequences

 

2.1. The European Union extended sanctions against Russia for another six months, so that European sanctions against Russia will be in effect until the end of January 2016. Russia is preparing its response to the extension of the sanctions. Prime Minister of Russia Dmitry Medvedev said that Russia, as before, will be guided by the principle of reciprocity                   2.2. St. Petersburg international economic forum (SPIEF) just came to an end, confirming its reputation of Russia's largest platform for investment decisions. During the forum 205 agreements  have been signed worth more than 293,4 billion rubles. The event was attended by over 10 thousand people – the highest number for the entire history of the forum. The meeting of foreign investors with the Russian President Putin was attended by the heads of the 27 International funds, long-term investors from 16 countries (including the USA, Saudi Arabia, Thailand? China, Europe and the Middle East, with a total capital of five trillion dollars ). Foreign investors openly talked about the difficulties they face while doing business in Russia and Mr. Putin stressed that Russia is open for long term and mutually beneficial partnership.                

3

Economic situation and investing.

 

3.1 Recently World Bank (WB) has improved its forecasts for Russia's GDP in 2015-2016. So, in 2015, the World Bank anticipates a decline in real GDP of Russia by not more than 2.7 %  and the growth rate in 2016 shall be about 0.7 % . In addition, under the new World Bank forecast of GDP growth in Russia by 2017 will reach 2.5 %. Over the next two years the WB expects to consolidate fiscal policy and some improvement of the state budget in Russia as well as the stabilization of oil revenues. However, we are   encouraged that the budget’s draft for 2016-2017 will involve significant structural reforms that will achieve a sustainable recovery of the economic growth in 2016 and the growth of about 2.5 %  in 2017.                                                                  3.2. Bloomberg argues that the growing rate has defied predictions of most Western analysts who have not considered the main factor of strengthening of the Russian currency - the armistice in Ukraine. In the first three months of 2015, the Russian currency on the indicators moved from being the worst in the world in the category of best refuting the predictions of even the most accurate in their predictions of analysts. The success of the first quarter can be continued in the second, Royal Bank of Scotland Group Plc confirms.

4.

Economy’s forecast,  prices, currency rate

 

4.1 The Russian forecast if the economy’s development in 2015-2017 is slightly different to the analysis of the World Bank.On May 21, the Russian Ministry of economic development  announced that in 2015, the decline in GDP could reach 1.8 %  in 2015, but  the Russian economy will grow by 2.3 % in 2016 and  2.5−2.7% in 2017. The Ministry of economic development added that this is a conservative estimate                                                                                  4.2. Falling oil prices, negative news about the arrest of the Russian property abroad were the primary drivers of a slight weakening of the ruble.  Key factors for the national currency, as before, will be oil prices and the geopolitical situation. Next week, we believe the ruble will be traded in the range of 54 -55,5 rubles against the dollar.. Forecast of the Ruble/Dollar rate on 03/07/2015  makes 55,36 RBL/Dollar

 

NEWSLETTER                                           RUSSIA                                     EDITION:  May  2015

1.

Political situation

 

1.1 On  May 9-th,  Russia celebrated the 70-th anniversary of the Victory in the Great Patriotic War. The military parade on the Red Square became one of the biggest events in the history of modern Russia, and it was attended by more than  18 million people across the whole Europe and the leaders of 60 countries. After the powerful military Parade on 9-th May European newspapers wrote that  over the past 15 years, the Russian  army has received the best technical equipment since the Cold war. NATO specialists paid  attention to the fact that Russia's Armed Forces ahead of the army of the USA and the UK by number of tanks, self-propelled artillery and systems of volley fire. As the experts  noticed  Russia  owns 15398 tanks, which is twice more than the United States and 37 times greater than that of the UK.

2.

 Sanctions and Consequences

 

2.1. The Finance Minister praised the actions of the Central Bank to stabilize the situation on the financial market of the country and stated that the Russian ruble is currently strengthened too much, gold and currency reserves are stabilized, the ruble was initially stable, and now began to strengthen. He guess, the national currency is strengthened  even too much. The Minister reminded that at the end of 2014 in Russia due to the weakening of the ruble the demand for foreign currency from population was increased, which led to the increase in the outflow of capital from Russia, to the acceleration of inflation, now the picture is observed  2.2. Chinese newspapers announced, several new agreements have been signed between Russia and China: in addition to large corporate agreements with Russian Railways and "Sukhoi” jets , agreement on  the growth of lending limits of banks from China  to Russia by $25 billion over two to three years, agreement on creating of the a Russian-Chinese investment Bank and agricultural Fund, but also on possible expansion of cooperation between China and  Customs Union (EAEU).                                                                                                                             .

3

Economic situation and investing.

 

3.1 The Minister of economic development made a statement that "the Adaptive potential of the Russian economy turned out better than we expected", which will provide positive growth rates at the beginning of next year, although it is still not the level that corresponds to our potential. According to the plans of the government, the economic recovery should be based on investment , according to the baseline forecast of the Ministry of economy, GDP growth in 2016 will amount to 2.3%, capital  investment 3.1%.The country has enough financial resources for this — the saving rate is high enough and the gap between it and the rate of accumulation (i.e. investment)  is big enough  .                                                                                     

4.

Economy’s forecast,  prices, currency rate

 

4.1 The Minister of energy of Russia believes  that  Russia does not expect a serious growth of oil prices in future, the oil price will not exceed 70 dollars per barrel by 2017;  in 2015 the average price of a barrel will be 60 dollars.                                                                                                 4.2. The majority of foreign investors, which suspended its operations in Russia because of the crisis, decided to return to the market. Growing interest is observed from a wide range of foreign investors hedge funds and large investment funds. The biggest demand for Russian assets from foreigners currently observed in the segments of corporate bonds and government bonds and shares. according to a recent order of the President of Russia Vladimir Putin, all major public companies and corporations will use the new dividend policy, which involves the payment to the shareholders in the amount of not less than 25% of its annual revenue.                                                 4.3. Ruble/Dollar rate during this month  was stable and makes 51,01 RBL/Dollar on 28/05/2015.

 

NEWSLETTER                           RUSSIA                                               EDITION:  April   2015 

1.

Political situation

 

1.1  Definitely,  the highlight of April became  the working visit to Thailand of the Russian  Prime Minister Medvedev. The Prime Minister hasl arrived to Bangkok i immediately after talks in Vietnam, where the final agreement is approved on the accession of Vietnam to the Eurasian Union with Russia, Kazakhstan, Belarus and Armenia. In Thailand during the visit besides the talks with the Prime Minister of Thailand on a number of issues including military cooperation and trade there were signed 10 MOUs ( Memorandums):  on energy, investment, agriculture, etc. The  business meeting of Russian and Thai businessmen  also became an important event,  the meeting was conducted by PM Medvedev, where Top Thai and Russian companies have  exchanged views on further development of bilateral relations in business.                                                                                                                                                1.2. The Russian President Putin took first place in the ranking of the most influential people in the world by the readers of the Times. The official voting results were published on Monday, the readers were asked to make their choice based on how this or that person in the past year has changed the world for the better. Not politicians  but just the readers of the Times magazine worldwide called the Russian President as the most popular, famous, and a respected politician in the world.

2.

 Sanctions and Consequences

 

2.1. The Washington Post said that the U.S. economists surprised by the pace of the strengthening of the ruble against the dollar since the ruble has grown at an incredible 34 per cent. In addition Bloomberg said that the growing rate has defied predictions of most Western analysts, which have not considered the main factor of strengthening of the Russian currency - the truce in Ukraine.                                                                                                                                                                                                 2.2. Bloomberg reports ".The growth of foreign exchange reserves of the Central Bank of Russia, which began last weeks, may be an indication of the end of the panic caused by the sharp fall in oil prices. The increasing rate of the Russian economy can convince Western governments that economic sanctions do not affect the Putin’s  government”.                                                                                     2.3. Despite the sanctions, the trade turnover between Russia and the U.S. in 2014 were down slightly: mainly due to lower imports of oil and oil products in the USA, but the supply of metals and metal products from Russia to the USA and ores jumped by 63% compared with 2013.                                                                                                     

3

Economic situation and investing.

 

3.1 The new version of the macroeconomic forecast for 2015 and the years 2016-2018 ws submitted by the Ministry of economic development to the cabinet of ministers. The document will be discussed at the government meeting, and then  baseline projections should form the basis of a three-year budget, and it is expected that next year the Russian economy will restore the import volumes of investment - purchase of production lines, machines and cars on private money as well as wage growth, 2017 will provide a sustainable increase in GDP. However, the forecast does not explain  the most important question: what exactly will make the Russian private investors to believe in the prospects of the domestic economy and to invest in Russia.

4.

Economy’s forecast,  prices, currency rate

 

4.1.   The Minister of energy of Russia in his  interview with the German newspaper Die Weltstated that  we do not expect a serious growth of oil prices in future, the oil price will not exceed by 2017 70 dollars per barrel, in 2015 the average price of a barrel will be 60 dollars"                                                          4.2  The Bank of Russia for the second time in the last two weeks has raised the stakes in its operations, the provision of currency for securities (currency REPO). Investors took this step as a warning of the Central Bank: speculative growth of the ruble, observed the last two months, it's time to limit.                                                                                                                                                  4.3.. US dollar on the exchange fluctuated mostly around 50-51 rubles. Prerequisites for recovery of the dollar's position above 55 rubles is not observed, strong Brent plays against him. We assume that the dollar in the beginning of May will stay at 50-52  rubles

On 30.04.2015 the currency rate is 51,70 RBL/Dollar.

 

NEWSLETTER                         RUSSIA                                              EDITION:   March 2015

 

1.

Political situation

 

1.1  Calm situation in the South-East of Ukraine, the ceasefire and the withdrawal of heavy military equipment give positive impact on the economy of Russia and Ukraine, as well as the reaction of the EU.                                                                                                                                        1.2. The activities of Vladimir Putin as President of Russia are  approves 88% of Russians, and only  7% are disagree,  according to a survey conducted in March.

2.

 Sanctions and Consequences

 

2.1. By the end of 2014, the SWIFT traffic’ growth  in Russia has allowed the Russian Federation to reach 13-th place in the world, so Russia put forward its own candidate to the Board of Directors                                                                                                                                  2.3. China in collaboration with Russia announced the creation of its own system of interbank payments similar to SWIFT  as it launches the system since the end of 2015 - January 2016, Experts say, that  the transition of the economic war between the US and the rest of the world will enter the active phase..

3

Economic situation and investing.

 

3.1 Russia  is the 2-nd largest exporter of weapons in the worlds, follows the USA, the export of Russian weapons in the past year reached $ 10 billion and  an increase made 9% compared with 2013. Russian weapons purchased by the 56 countries of the world, 60 % of the transactions were in India, China and Algeria, procurement is as follows: China (2.3 billion dollars), India (1.7 billion), Venezuela, and Vietnam (1 billion).                                                                                                3.2. The ruble was trading at week consistently, despite the unstable oil and the persistence of geopolitical background in Arab world.. Furthermore, the Russian currency will continue to get stronger and keeps the level of 57-58 rubles/dollar                                                                    3.3. The government just completed the provisions of the earlier announced the holding of a full Amnesty capital returning to Russia. The Central Bank believes that the Amnesty of capital may be one of the factors the compensation of capital outflow from Russia. but it completely does not compensate. Amnesty will take into account the requirements of the FATF (Financial Action Task Force, an intergovernmental organization that produces standards in the sphere of combating money laundering and financing of terrorism).

4.

Economy’s forecast,  prices, currency rate

 

4.1.   Wheat exports from Russia decreased by 34% after the introduction of the export tax, which occurred on February 1, 2015r. At the same time, exports of barley has increased in 12 times, (information of the Ministry of agriculture and the Federal customs service of Russia.                        4.3. In the period from  February1 -March, 18, 2015 Russia exported 829 tones of wheat against 1 257 million tones in the same period last year. Barley exports jumped to 868 thousand tons compared to 69 thousand tons for the same period in 2014. For barley export duties were not imposed.
Grain exports for the current crop year (July 1, 2014 to March 18, 2015) made 25 million 579 thousand tons ( compare to 19 million 786 thousand tones for the same period of last agricultural year)

Forecast:
A rise in the cost of oil at the end of the week resulted in a significant growth of business’ interest to the Russian ruble. However, we do not have a confidence in the continuation of this dynamic in next weeks.  We expect Dollar rate in the next week about 58 RBL/Dollar.  

 

TRCCNEWSLETTER                       RUSSIA                          EDITION:   February  2015

1.

Political situation

 

1.1.  Due to the armistice agreement in the South-East Ukraines, developed by the leaders of Russia, Germany, France and Ukraine in Minsk on February 12, the fire was stopped. Observers of the European Union noted that the truce is generally followed.                                                              1.2. EU is noted that the beginning of execution approved by the Contact group in Minsk measures helped to reduce the intensity of the fighting in South-East part of Ukraine and  led to the reduction in the number of victims among the civilian population. The Russian President, the German Chancellor, the French President and the Ukrainian President in a telephone conversation focused on the need for strict compliance achieved in Minsk agreements.

2.

 Sanctions and Consequences

 

2.1. Sanctions enfluences the Russian economy  and the forecast earlier growth has showen kower figures.  Russia’s foreign turnover in 2014 with different countries as follows:                                                                                                         

Country            

trade turnover in %

European Union

-7,3%

USA

+7,1%

China

+1,1%

Belarus

-4,8%

Tajikistan 

+21,1%

TOTAL foreign trade turnover

-5,1%

Source: The federal agency of the state statistics

3

Economic situation and investing.

 

3.1. Last month Russia "utilized " U.S. Treasury obligations amounting to $22 billion, this is a record but Russia still owns $86 billion, which is a  "minimum level since June 2008. China also sold  US Treasury obligations for $6 billion and Japan urgently dropped off $10 billion  of US Treasury bills  If to take a look on all securities and deposits in the U.S. (not just t-bills),only in December 2014 foreigners brought away from USA incredible $174.8 billion, this shows a dangerous tendency of money outflow from the USA.                                                                                                          3.2. Russia summed up the results of economic development in 2014 as follws:                                                                                                                                 

Final results  of the Russian economy in 2014 ( in %)

Economic growth

0,6%

Industrial  growth

1,7%

Agricultural growth

3,7%

Retail growth

2,5%

Real wages growth

1,3%

Real disposable income

-0,1%

Source: The federal agency of the state statistics

4.

Economy’s forecast,  prices, currency rate

 

4.1. Forecast of the Russian economy’s development in 2015-2016 is in the Annex 1 4.2.The past year has shown,  Russia is becoming less dependent on the world economy, This year Russia continued to slowdown in industrial growth.                                                                                    4.3. Rising oil prices have strengthened the position of the Russian  national currency, which once again confirms the significant dependence of the currency market on oil prices. Ruble continues to strengthen against the dollar and Euro. Focusing on the direction of the market, we can predicted nex week the further volatility of the Russian national currency.                                                          Dollar rate on 27/02/2015 makes 60,71 RBL/Dollar .                                                                                             

 

TRCCNEWSLETTER                     RUSSIA                            EDITION:   January  2015

1.

Political situation

 

1.1  From 14-16 February Russia has held an economic forum “Russia & the World”, which was attended by the country's President, Prime Minister and all the key Ministers responsible for the economy. Everyone was concerned about the main question is the development of the economy in the coming years. Discussion of anti-crisis policy of the authorities on the forum has been limited to the capabilities of the Ministry of Finance and the Bank of Russia to mitigate the speed and depth of the fall of the Russian economy in 2015. The head of the Central Bank of Russia announced a reshuffle in the Bank and the expected easing of monetary policy, although the head of the Central Bank insists on the immutability of course. However, even in the event of a sharp slowdown in inflation, and reducing the rate of the Central Bank effect for the economy, is likely to be zero - a large part of the losses will be transferred from the budget and the banks in the company.

2.

 Sanctions and Consequences

 

2.1. Fears of lower investment rating of Russia is not encouraging to investors, increasing their getaway in foreign currency. The nervousness in the market reinforce the continuing escalation of tension in the South-East of Ukraine and the German Chancellor about the possibility of extending sanctions in March 2015. However, in January 2015 the Russian stock market has attracted foreign investors for its cheapness. For the past week, the inflow of money into funds that invest in domestic assets amounted to $15 million, According to EPFR, for the week ended January 14, funds focused on investments in Russia, there has been an influx of funds. The positive difference between the funds received and departed from such funds, according to results of the week totaled $15 million, However, through funds emerging markets of Russia was recovered $73 million.                                                                                                                                                            2.2. In December 2014 falling by 37% ruble was enough for one day, and to restore the trust of the population and businesses  Russia has to spend years. After a short break in early January, the dollar and the Euro on the Russian foreign exchange market began to strengthen their position. In the course of trading, the dollar was higher than the level 65 RUB/$, and Euro - 76 RUB/€. Market participants are buying the currency, because they fear the downgrade of Russia, as well as extending the European sanctions                                                    

3

Economic situation and investing.

 

3.1. According to EPFR, all funds of emerging markets during the reporting week lost $2.7 billion Particularly Asian funds (excluding Japan hard hit : they lost to 0.60% ($2.2 billion). According to analysts of ‘ Sberbank Investment Research\, over the past year from emerging markets funds were withdrawn 3.2% of funds under management ($25.8 billion) and 2.6 % ($23 billion) for the last three months. Western investors reduce presence in the markets of developing countries, because they fear the global economic slowdown. Last week the World Bank (WB) published a report "Global economic prospects", in which it reported a decrease in the forecast of world economic growth for 2015 to 3% from 3.2%. The forecast for 2016 is reduced to 3.3%, and in 2017 the World Bank expects global economic growth of 3.2%.
The world economy has finally emerged from a period of weak recovery after the crisis, its growth is gaining momentum, according to the WB). The acceleration will occur in both developed and developing countries. In Russia, the  WB estimates that economic growth in 2016 will increase to 2.7% from the current 1.4 %..

4.

Economy’s forecast,  prices, currency rate

 

4.1. Sberbank’ published data of Russian statements on 1-st January 2015. By the end of 2014 net profit amounted to 305,7 billion rubles, which is slightly less than in 2013. The sphere of Russian innovations in 2015 is expected to increase innovative output level of 12% and a threefold increase in sales of innovative products. According to ‘RUSNANO’ corporation, the volume of sales of innovative products in 2014 made  100 billion rubles in Russia, next year it is planned to increase it to three times.                                                                                                                                   4.2. Investment bankers are not happy with predictions: according to analysts from ‘Goldman Sachs’, the ruble exchange rate in 2015 will be 69 rubles/$, Brent crude oil dropped to $50,4/barrel. Meanwhile, Saudi Prince Al-Walid Bin Talal argues that the price of oil will not reach $100. Overall, the Russian economy this year, expects the inflation rate to 13.7% sure in ‘Morgan Stanley’. According to  the review of the investment Bank ‘Goldman Sachs’, forecasts of the exchange rate of the ruble in 2015 reduced from 47 ruble\$ to 69 rubles/$ The situation will start to level off in 2016, but not significantly: the ruble is 58 ruble/$ against previous expectations 45 rubles/$. At the same time, analysts at ‘Goldman Sachs’ said and forecasts for oil. Barrel ‘Brent’ in 2015 is estimated at $50,5 (previously $83,3).

4.3. Rosstat (The Federal Statistic Service) confirmed the assessment of inflation in the Russian Federation for the year of 2014 at 11.4% This is the highest figure since 2008, when consumer prices rose by 13.3%. As stated in the records of the office, in December 2014 consumer price growth was 2.6%. According to the Ministry of economic development, the growth of Russia's GDP in 2014 was 0.5-0.6 %
Thus by the end of 2015, inflation will most likely be a two-digit or "on the verge". According to ministry the impact on inflation will provide import dynamics and fluctuations of the ruble. Peak inflation will be in March-April, in annual terms inflation in this period may be 15-17%                                                                         
                                                                                  Dollar rate on 20/01/2015 makes 64,97 RBL/Dollar                 
                                  

 

NEWSLETTER                               RUSSIA                             EDITION:   December  2014

 

1.

Political situation

 

1.1 Russian President Vladimir Putin on December 18, 2014 in his press conference summarized the political and current economic  situation in Russia with the latest  data, the President delivered his ideas on measures against crisis, foreign currency, actions of the Central Banks and the government and also some correspondents’ questions. After the President‘s speech the Russian currency already shows visual improvement during last 5 days.                                                                                                                                                                                       1.2.The Ukrainian side and proclaimed the independent Republics in the South-East of Ukraine confirmed, that since December 12 military action is terminated and the truce continues.                                                                                                                              1.3. Putin visited India for a month before Barack Obama, 25 agreements were signed, the total cost in the tens of billions of dollars, and also the Indian Prime Minister promised to support Russia in the fight against the "new challenges".

2.

 Sanctions and Consequences

 

2.1. Sharp weakening of the ruble due to declining of  oil prices, and by increasing the outflow of funds from investing in the Russian Federation. The Central Bank of Russia raised the refinancing rate from 10.5% by 17,5% in order to save the rate of the national currency. The strengthening of the national currency we expect closer to the new year holiday.                                                                                                                                                                        2.2.  During 2014 the outflow of funds from Russia.amounted to $550 million Withdrawal of Russian assets occurs on the background of General decline of interest in emerging markets. For the past week clients funds whose investment policies are focused on this sector, took away $1.6 billion, a week before the flow was $2.8 million, the Market is experiencing a weak interest in risky assets because of fears about the prospects for economic growth, especially in China and Europe.                                                     

3

Economic situation and investing.

 

3.1. At his news conference the Russian President Putin summarized the results of the economy’s development in Russia as follows” from January-October 2014 in Russia GDP grew by 0.7 %, and the final figure may be 0.6%. The trade surplus grew by $13.3 billion to reach $148.4 billion. Industrial production  in the first 10 months 2014,  went up by 1.%. Unemployment is low: now it is around 5 %, The agro-industrial complex is developing, by the end of the year growth will show up to 3.3 %. This year we had a record crop of 104 million tons. Despite the turbulent situation on the financial market, this year the Federal budget  will show a surplus,  revenue will exceed expenses by 1.2 trillion rubles [over $20 billion], which is about 1.9 % of the GDP. The main achievement of the year is in the social sphere and the positive demographics. Natural population growth in 2014 was 37,100 people. In 2014 maternity subsidizing capital amounted to 429,408 rubles for every second child. Russia has met and exceeded the targets set for salary rates for ten workforce categories: teachers at schools, kindergartens, counselors, university faculty members, medical doctors, paramedics and nurses, and employees of cultural institutions and adjusted pensions to 8,2% in 2014. 11,700 Defense Ministry servicemen received permanent housing and 15,300 received service housing. This is 100% of the year’s target figures.

4.

Economy’s forecast,  prices, currency rate

 

4.1.  Minister of agriculture of Russia said that Russia has generally solved the problem of substitution of food, the importation of which was prohibited under the response to Western sanctions. In the circle of alternative importers primarily includes Belarus and Kazakhstan as members of the Customs Union, acceding to the Union, Armenia and Kyrgyzstan and other CIS countries, Latin America and Asia.                                                                                                                       4.2.Our forecast on the current economic situation: everything is quite simple, the deficit of ruble in trade transactions in terms of the dollar makes 342 billion. Corporate debt of Russia is $142 billion but the  Reserve Fund of Russia ( which should be returned by the  USA) is $ 493 billion dollars. Russia's budget surplus. Russia  significantly dependents on imports, but it can be understood and there is work to do. Russia, as the state, does not have any foreign  debts. At present, oil price drops, but it will not last long                                                                             4.2. Inflation. By the end of 2014,inflation in Russia can exceed 10%, but shall not reach 10,5% . We believe, in the new year eve the ruble might be up to 54 -55 rubles/$.              Dollar rate on 24/12/2014 makes 54,56 RBL/Dollar / Consensus forecast of the Russian banks on 30/12/2014  makes 56,00 RBL/Dollar

 

NEWSLETTER                                           RUSSIA                        EDITION:   November 2014

 

1.

Political situation

 

1.1 Forbes’ named Russian President Putin is the most powerful man in the world
 Putin for the second time in a row topped the ranking of the most influential people in the world, announced by the American journal ‘Forbes’. As in 2013, the 2-nd place was taken by U.S. President Obama, and the third by the President of China Xi Jinping.
1.2. President  Putin arrived in Beijing to participate in the work of the APEC Summit. The agenda of the summit is the economic cooperation. Russian side prepared a huge package of documents -- 17 agreements with Asian countries. On 12 November, he holds bilateral talks with the President of Indonesia, the Prime Ministers of Japan and Malaysia, as well as with the head of the IMF. On the same day, Putin has a speech on the topic  "the Value of ATP for Russia". November 11, Putin is scheduled to meet with Prime Minister of Australia.

2.

 Sanctions and Consequences

 

2.1. Russia is expanding its cooperation with Eastern countries. A new level of strategic partnership overlook relations between the Russian Federation and China. Cooperation with South Korea, India, Vietnam, Thailand  and several other  Asian countries also look s very perspective.                                                                                                                                        2.2. Russia and China have signed 40 agreements in October 2014 during the visit of Premier of the State Council of China Li Keqiang in Moscow, including contracts on energy, banking, transport, agriculture, space technology, telecommunications.                                                          2.3.The Chairman of the second largest Russian Bank ‘VTB’ believes that the United States will abolish the anti-sanctions not earlier than in 2.5 years, and limiting the movement of capital into the Russian economy will continue for a long period. The validity of EU sanctions will expire in 2015, and the US  measures will last longer and will be cancelled after the presidential election of 2016.

3

Economic situation and investing.

 

3.1. Analysts from ‘ING’ agency consider that the oil factor leaves on the second plan for the short-term horizon, in other words, this is a full blown panic with hints of currency crisis. The situation in Ukraine is far from comfortable, which does not allow to hope for the abolition of the Western sanctions in the coming months. Moreover, the mood on external markets also remain depressed because of the weakness of the economies in the Euro zone and China provokes a decrease in demand for risky currencies and assets, including commodities. But among large corporate clients there is no panic but there is high anxiety.
3.2. The Central Bank increased the refinancing rate  u to 8,5% this measure of the CB is supposed to inprove the rubles positions.

4.

Economy’s forecast,  prices,  inflation, currency rate

 

4.1. Due to a sharp rise in the Moscow stock exchange rates of the dollar and the Euro for the first time in history exceeded 48 RBL/$ 60 RBL/EUR and stabilized on 11.11.2014 on 45,89 RBL/$. What is happening in the foreign exchange market causes confusion among analysts;  that can't explain by the usual fundamental factors. The  growing panic among the population, might  be stopped only by the intervention of the Central Bank.                                                      4.2. China takes the United States and Canada’s share of the pork meat supply, Russia already approved  to supply pork with Chinese enterprises. For the first time in the last 10 years China has shipped 800 tons of pork to Russia in this month. Shipment was under control in China specialists by the Russian inspectors, they also controlled the procurement process of pork. Now China is ready to provide the Russian market with vegetables, fruits and pickles and interested to buy in Russia grain, rape and honey,                                                                                                  Inflation. ‘ING Eurasia’ focases the inflation rate in 2014 up to 9%.                                             Consensus forecast of the Russian banks  RBL/$ on 14/11/2014  makes 46,51 RBL/Dollar

 

 

NEWSLETTER                                              RUSSIA                           EDITION:   October  2014

1.

Political situation

 

1.1. In Eastern Ukraine on October 11 was declared "silence mode", which provides a complete stop of fighting. There is a hope that in the near future Ukrainian army and the rebels  begin the removal of artillery. The parties periodically accusing each other of violating the agreement. In Donetsk the next day after the introduction of a "silence" Ukrainian army continues to kill civilians .
1.2.The migration service of Russia informs,  number of labor migrants in Moscow  became visibly  more at the expense of the citizens of Ukraine (data as of October 13, 2014), the Number of labor migrants in the Moscow region increased, including at the expense of the citizens of Ukraine, From January to September registered 950 thousand arrivals of foreign citizens, of which about 90% are coming for employment. The migration service has noted an increase of foreign nationals by 14%, mainly at the expense of Ukraine, Tajikistan and Moldova  taking into account results of events in Ukraine Federal Migration Service sees a steady increase in the entry of nationals of neighboring countries on the territory of the Moscow region.

2.

 Sanctions and Consequences

 

2.1. In the framework of the session of the IMF, the World Bank, there were arranged consultations with  the  Russian Central Bank and the National Bank of Ukraine The IMF expects that the Russian-Ukrainian conflict will lead to growth of the external debt of Ukraine to the "Greek" level above 100% of GDP in 2015, but nevertheless  IMF insists on requiring additional support for deep economic reforms in the country.
2.2.The forecast of the IMF in Russia prognoses in 2015 and  suggests the abolition of the at least European sanctions against Russia and the Russian food contra-sanctions  in 2015
In General, the IMF and the World Bank in their prognoses for the Russian Federation, were neutral. Indeed, except for the underlined attention and understanding, the IMF and the WB have a little to support Russia
.

3

Economic situation and investing.

 

3.1. Edition “The Los Angeles Times” wrote that the fall in oil prices, partly due to the shale (gas) revolution in the US will hit Russia and Iran stronger than Western sanctions, If you look at the prices, only from June 2014 oil prices on world markets fell by about 20% due to increased of oil production and a slowdown in economic growth in Asia and Europe.                                                 3.2.Russia considers the most promising cooperation with Asian countries, primarily with China. On  October 12-13,the Russian Prime Minister and PM from China, have signed more than 30 agreements.                                                                                                                          3.3.Russian President Putin said that Moscow is not interested in the collapse of economic ties with Europe. Putin focused attention to the vigorous growth of Asian economies and China in particular, China's economic growth should be used for economic development of other countries. He mentioned: among the priorities of Russia's deepening business, trade, investment and technological cooperation with the countries of Latin America, the Asia-Pacific, with our colleagues in the BRICS, including China and India.

4.

Economy’s forecast ( inflation and currency rate)

 

4.1. The head of the auditors chamber of Russia has given a speech at parliamentary hearing, who said that a serious risk to the Russian economy is the limited internal financial resources and may be more difficult to attract external finance.   In 2014 and in subsequent periods, the inflation rate may be higher than expected, to achieve the expected level of inflation at 7.5% for 2014, in October-December, it should be 1.1 %. Last year during this same period, the inflation rate was 1.7 %. These figures today are already unrealistic. Additionally, the auditors pointed to the restrained dynamics of the standard of living of the population, while consumer demand in recent years has been one of the factors supporting economic growth. Chairman of auditors said that in the years 2015-2017 budget expenditures will increase by 1.5 trillion rubles, their share in GDP will be reduced from 20 % to 19%. The main tool for the formation of the expenditure side of the budget will remain the government programs.                                                                      Currency The reasons for the continued pressure on the Russian currency is still the current shortage of foreign exchange liquidity in the domestic market plus ssituation with oil prices in the world market.                                                                                                                          Concensus forecast of the Russian banks on 18/10/2014  makes 40, 30 RBL/Dollar.                                                          

 

 

NEWSLETTER                                RUSSIA                             EDITION     September 2014

 

1.

Political situation

 

1.1.The second convoy of Russian humanitarian aid for the Ukrainian  Southeast citizens suffered from junta bombing delivered food and medicine on 200 trucks, all trucks now came back to Russia
1.2.EU postpones the implementation of the key provisions signed the Association agreement with Ukraine until 31.12.2015. In response, Russia promised not to impose sanctions and will not achieve the Ukrainian economy.  

1.3. Summit of heads of States-members of the SCO (Kazakhstan, Kyrgyzstan, China, Russia, Tajikistan and Uzbekistan), as well as senior representatives of countries with observer status in the organization (Afghanistan, India, Iran, Mongolia and Pakistan held in Tajikistan. SCO countries adopted the Declaration supporting the “Peaceful plan of Putin for Ukraine”. Summit also adopted the simplified Declaration on the admission of new members into the ranks of the SCO. India and Pakistan have already expressed their desire to join and are in a line for 2015.

2.

 Sanctions and Consequences

 

2.1. A new package of EU sanctions against Russia entered into force on 12.09.2014. The sanctions will affect the Russian oil companies with revenues of more than 1 000 billion rubles as well as some of the largest enterprises of the military industry. Restrict access of Russia to the international capital market is strengthened too.                                         2.2. The new sanctions, the price of oil immediately has had a negative effect on the dynamics of the ruble exchange rate. The Russian ruble may continue its decline.                                         

3

Economic situation and investing.

 

3.1. Before sanctions, foreign investors actively increased investments in the Russian market. During the last week international funds invested in Russia more than $200 million, However, this result does not take into account the introduction in relation to the Russian Federation of a new package of sanctions by the EU, as well as responses the Russian side.
Data of ‘Emerging Portfolio Fund Research’ for this week, indicate a growing interest among international investors in developing countries. During the week the inflow of funds into investment funds operating in emerging markets amounted to $3.4 billion, or five times more than the amount of funds received a week earlier. Almost continuous inflow of funds continues 14-th week in a row, during this time, investors have invested in funds in developing countries more than $28 billion                                                     
3.2. The flow for the reporting period amounted in the aggregate to $203 million, which is almost five times more to attract a week ago. A positive result is recorded and the funds that invest exclusively in the Russian market, where investors have invested more than $140 million a week ago one of them took more than $30 million..

4.

Economy’s forecast ( currency rate)

 

4.1. Inflation. According to research of ”ING Eurasia” inflation may reach up to 9%, and “Alpha Bank” is  predicting even up to 10% by the mid of 2015.
Currency. Weakness of the Russian economy, the negative geopolitical background, caused by the military conflict in South-Eastern Ukraine, concerns the introduction of additional sanctions against Russia and Russian companies from EU have a negative impact on the Russian currency.
                                                                                                               Dollar rate on 16/09/2014 makes: 37,98 RBL/Dollar                                                Consensus forecast of the Russian banks on  20/09/2014 makes 37,75 RBL/Dollar

 

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