LoginIn this report we look at scenarios for the economy over the next 36 months
based on the outcome of the several dangerous conflicts in which the country is embroiled. The more immediate of those conflicts is with the holders of Eurobonds but several defining challenges lie ahead.
No going back. It is clear that the old growth model is gone forever. The question now pre-occupying businesses and investors is “what is the new norm?” and what does it mean in terms of future growth? In this month’s report we look at some of the possible routes forward.
Kendrick White is an American veteran of business in Russia, and was Vice-Rector of Innovation at Lobachevsky State University in Nizhny Novgorod. He was removed from that post in late June 2015, following a TV programme on the main state-owned channel, which said that his presence at the university was unacceptable. The only reason given was that he had reportedly replaced pictures of Russian academics with American ones. More recently, it has been confirmed that Mr White has a new job at the university as head of the Centre of Innovation, and the change in his status was due to a reorganisation.
Declining growth. Georgia’s economy is suffering from the fallout of Russia’s recession and the ruble devaluation along with most other economies in the CIS and Eurasia region. GDP is expected to slow to growth of between 2 and 2.5% this year, from almost 5% in 2014.
Nothing new. The strong statement and warning of further sanctions from the G7 leaders was predictable and adds nothing new to our understanding of the issues and risks. Consensus is for a full sanctions rollover. The EU is expected to fully extend the sanctions list, with the next review on 31 December so as to sync the review with the key date for the Minsk II agreement. Unless Minsk II is moderated, an end is hard to predict. The critical outstanding point in the Minsk II agreement is that Kiev should regain control of its national border by 31 December. Given the current circumstances that seems an impossible condition, and so long as sanctions relief is linked to that requirement, then it is hard to see when sanctions may be reviewed.
Armenia’s economic performance this year will be impeded by the impact of the Russian ruble depreciation and the expected drop in remittances from Armenian workers in Russia. We expected GDP growth to contract to just 1% in 2015 from over 7% in 2012.
Good start … but far from safe. The macro results for the first quarter were better than had been feared late last year. However, the trend in the current quarter is already worse and we are keeping our forecast for a 3.5% decline in GDP for the full year, with consumer‐related sectors expected to bear the brunt of the decline.
Russia’s dollar denominated equity indices, up 23%, have been the best performing amongst major markets since the start of 2015. Investors have bought stocks which were either amongst the worst performing last year or are in the growth category. Mechel (+141% YTD) and Luxoft (+32% YTD) are respective examples.
– Russia’s dollar denominated equity indices, up 23%, have been the best performing amongst major
markets since the start of 2015.
– Investors have bought stocks which were either amongst the worst performing last year or are in the
growth category. Mechel (+141% YTD) and Luxoft (+32% YTD) are respective examples.
– The key reasons include the rally in the oil price and the fact that heavy-weapons appear to be
withdrawn by both sides in eastern Ukraine. There are also other factors which have helped allow
optimism to rise, including two significant deals by US companies to acquire Russian businesses.
No support for politics at any cost. Opinion polls are starting to show declining public support for the Kremlin’s campaign to control eastern Ukraine. Only 19% of people now believe that the region should be a part of Russia compared to almost 50% last spring. Concern over the cost of absorbing the region and the economic consequences of the crisis now outweigh nationalist ambitions.
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All Rights Reserved
Copyright © 2021 Macro-Advisory Ltd. All Rights Reserved
Copyright © 2022 Macro-Advisory Ltd.
All Rights Reserved
