27/09/2017
Dear TRCC Members,
TRCC monthly newsletter of September 2017 summarizes information on the most interesting economic events of September 2017as follows :
· The Eurasian Development Bank (EDB) presented the report, where it argues that the growth of energy production in Russia will accelerate growth of the industry and energy exports. The ongoing monetary policy will continue to support the recovery in consumer demand. It is expected to remain weak investment activity of enterprises before the end of 2017. But in case of the introduction of new sanctions, GDP in 2018-2020 will be slightly lower to 1.2%;
· Despite Western sanctions, the Russian economy and its closest partner Belarus increase the growth rate of economy. Let us take not the Russian statistics but the latest data of the Eurasian development Bank (EDB) and the Agency Reuters. Analysts of the Eurasian development Bank is based on their calculations of development of economy of Russian and Belarus, and it clearly showed GDP growth in each of these countries was 1.4% by the end of 2016, Economists from many countries claim, and carefully analyze why Western sanctions imposed by the US and EU can stop Russia's economic development. EDB presented at the ASEAN forum the analysis "Eurasian transmission: from integration to growth". Largest Eurasian Bank increased its forecast for economic growth in 2017 in the post-Soviet countries from 1.3% to 1.6% (in Russia up to 1.7-2.0 %), and analysts have paid special attention to the positive dynamics of the economy and increased economic activity in the 1st half;
· In September we experience the strengthening of the Russian currency contributed by foreign investors, which retain the increased interest in carry-trade. However, analysts see no prospects for a significant strengthening of the ruble’s positions, including the background of expectations of lower key interest rate by the Bank of Russia. Dollar weakens elevated pace around the world. Confident strengthening of the Russian currency since the beginning of August, and amid a slight decrease in the cost of oil (according to Reuters, spot market quotations of North sea Brent crude oil exceeded $53 per barrel, Russian Urals $52 per barrel), currency market participants attribute the strengthening of the ruble in recent days, with active purchases of Russian assets by foreign investors; one of the reasons for the observed strengthening of the ruble is the desire of foreign investors to buy ruble-denominated assets to reduce the yield thereon (which will probably happen in the case of reduction of the key rate of the Russian CB. Factor in a relatively high yield of ruble assets amid slowing inflation and inflation expectations again increases the demand for stock market instruments. In particular, this became clear last week, when the demand for OFZ issues was oversubscribed three times (to 60 billion rubles from 20 billion). Non-residents are increasing their buying OFZ on the background of the release of positive data on inflation. In August Rosstat (Federal agency of the state statistics) regularly recorded weekly deflation, and on this background at the end of the month in annual terms, CB analysts expect inflation at 3.5%. In the current conditions (slowdown of inflation, the strengthening of the ruble) CB gets more freedom in regard to monetary policy. According to market participants, at the next meeting of the CB Board of Directors, which is scheduled for 15 September, the CB may reduce its key interest rate by 50 basis points (to 8.5%). In addition, it increases the probability of a rate cut to 7.5% by year-end, thus reducing the attractiveness of carry-trade for foreign investors;
· According to United credit Bureau (UCB), small business lending is at a very low level in Russia. Among 3,17 mln. companies of small business registered in Russia only 10% have opened loans. For comparison, among the economically active population of the country 60% of citizens already have leans. Moreover, credit loans’ pressure on small enterprises is still very high. Each entrepreneur has an average of 2.7 of loans with total debt more than 2.2 min. rubles. Average an Russian borrower has 1.7 loan and owe the Bank 10 times less, just about 210 thousand. Most often individual businessmen take cash loans (63% of borrowers), 15% take credits with security, 9% open credit cards, 9% mortgage loans, 4% loans for car’ purchasing. The high loan burden of small enterprises reflected on their payment discipline, 26.5% of these borrowers are not paying their loans on time. Almost a quarter (21%) are in default, i.e. not made payments for more than three months. Individual entrepreneurs traditionally are classified as not the most favorite of borrowers for banks. Small business income is not always stable and often is difficult to predict for the lender;
· Last week, the Russian ruble has completed the strengthening of its position against the leading world currencies. Due to the increase of oil prices the ruble was able to get into the green zone. The next week the rate may continue to strengthen on the back of strong oil — to the level of 56.5–57 rubles/dollar, and assuming the stabilization of the situation in the banking sector, where financial rehabilitation of two major banks over the last few weeks could provoke a surge of uncertainty. We look forward to continued fluctuations on the Moscow market in the range of 57-59 RUB/$ in the period from 25 to 29 September 2017.
We trust that you will find this brief newsletter informative and useful for your business.
Should you require more information, please do not hesitate to contact us.
With the very best regards and deep respect.
Truly yours,
Prof. Sourat, Executive Director
of Thai-Russian Chamber of Commerce
