Browsing documents with the theme of Sanctions
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Macro Monthly October 2018: Is Russia in the eye of a storm or preparing for a new growth phase?
Waiting for sanctions updates. There is a sense of being in the eye of the storm with regard to sanctions. After the frenzy in August and early September, the situation is now calm. But activity will pick up in November, in the aftermath of the mid-term elections and ahead of the Phase II CBW sanctions decision. We update the current position and highlight some conflicting indicators in this report.
Russia Macro Monthly September 2018
2019 downgrades … Both the Economy Ministry and the Central Bank have cut their GDP forecasts and raised inflation expectations for 2019. But both see the dip as temporary and expect a much better performance from 2020.
… but 2018 growth picture looks marginally better. Both PMI indicators rebounded in August, as did the government’s index of leading indicators for GDP. 2Q18 GDP was reported at 1.9%.
Russia Macro Update: Catching a falling knife – August 2018
Losing momentum. The Q2 GDP growth indicator was weaker than expected and is consistent with other indicators that show slowing momentum. But we still see no reason to adjust our 1.7% growth forecast for this year. Another sanctions surprise. The latest US sanctions took everybody by surprise and have contributed to further ruble weakness. The risk of additional sanctions, especially the dangerous DESKAA bill now looking for support in Congress, is very high. There is no danger of a financial crisis or a drop in expected growth but the real impact is the drop in investment and FDI (less than US$2 bln in Q2 from over US$12 bln in 2Q17). This badly hurts future growth prospects.
Sanctions: Winter comes early to Moscow
New sanctions announced. The United States has accused Russia of using chemical weapons in connection with the UK poisonings and will add additional sanctions on 22 August. These measures are relatively modest in terms of impact but leave open the possibility of more serious measures being imposed after a further 90 days. Congress is preparing even more draconian measures. The latest sanctions come at a time when several new sanctions bills, aimed at restricting investment and trade with Russia, have been introduced to Congress. The most dangerous bill, the so-called DESKAA bill, which has broad bi-partisan support, would restrict investment into Russian sovereign debt and make it almost impossible for US entities to work with Russian energy companies in international projects.
Russia Macro Monthly: Pension Reform and its Discontents – July 2018
Russia hosts good World Cup. Despite our headline in the June Monthly, Russia’s football team exceeded all expectations. The hosting of the event also confounded critics. However, optimism that this may lead to reform acceleration or, e.g. a much easier tourist regime, and thus boost tourism, is unfounded at this stage.
Pensions reform backlash. Opinion polls show a large majority of Russians are unhappy with the proposal to raise the retirement age. Putin is likely to wait until the extent of public feeling can better be gauged in the autumn before making a final decision. He has never pushed a genuinely unpopular reform because of the instability risk.
Russia Macro Monthly June 2018: Will the new government team fare better than the nation’s footballers?
New government, new challenges. Prime Minister Medvedev unveiled a government with a few new faces, and a plan to deploy RUB8 trillion (US$129 ln) on national projects on health, education construction, and the digital economy.
Kudrin given oversight role. Alexei Kudrin will head the Audit Chamber. Kudrin has regularly stated that he would never take a non-job in government so it is expected that he will make the Audit Chamber a more vocal agency and have a greater role in budget spending oversight.
Macro-Advisory May 2018 Monthly – Now for The Hard(er) Part
New-old government. As expected, Prime Minister Medvedev is to remain in his job. There are some significant changes amongst deputy PMs, indicating a need for a new approach, which may be interpreted as signaling more spending on health, education and infrastructure.
Need to focus on the economy. Polls show that while people strongly support the president they are increasingly critical of the economic performance. It is clear that if Putin wants to retain public support during this next term, he will need to focus more on the economy.
Macro Monthly – What Difference Do April Sanctions Make? – April 2018
Sanctions game-changer. The 6 April US sanctions were something of a game-changer as they targeted some oligarchs and their businesses. Investors and businesses are likely to adopt a more cautious approach to Russia for some time until the risk level is better understood.
Waiting for a response. A Duma committee is debating retaliation measures, which it wants the President to act on. But comments from Administration officials suggest a much more cautious approach and a wish to avoid any actions which would hurt the economy.
Russia Macro Monthly: Can continuity lead to change? – March 2018
Putin’s election address to Federal Assembly. In lieu of a concrete election program, the President made a late annual state-of-the-nation speech that laid out a liberal economic vision and tough foreign policy. The latter appears to be more electoral posturing than a major change in nuclear doctrine. We set out the main economic points and those with implication for business opportunities, in this monthly.
Kudrin warns of inertia. Alexei Kudrin said that there is still no agreement on an economic reform agenda within the government or with Putin. He warned that without a clear program the government will follow a “inertia program” which will keep growth low.
Will 2018 prove to be a turning point? – February 2018
2017 growth at 1.5%. Rosstat estimates last year’s GDP growth at 1.5%. A weakening industrial production trend was offset by stronger growth in agriculture and a recovery in retail sales. VEB estimates Q4 growth at 0.6%, down from +1.8% in Q3 and 2.5% in Q2.
2018 should be better. We forecast growth in 2018 at 1.8%, rising to 2.0% in 2019. The key factor will be the strength of consumer activity and whether the government will boost budget spending, should the average oil price stay above US$60/bbl, later in the year.
Russia’s Capital Markets in 2018: Riders on the Storm
Well positioned. Russian assets are well positioned to outperform global peers in 2018. For equities whether that means strong price appreciation or another year of flat performance will be determined by the trend in global markets. Russian equity indices will hardly rise against a decline in global markets but should outperform a global rising trend.
Macro-Advisory 2018 Political Outlook
Outlook for 2018. There is no reasonable basis to assume there will be any major changes in Russian politics in 2018. We think there is at best a 25% chance that Putin will use his new mandate to implement the major reforms that Russia needs to move to a better economic growth path. More likely he will choose stability because it is lower risk. Speculation will then move to what happens in 2024. Who will Putin choose to succeed him, will that choice be challenged, and what role will Putin have thereafter?