Russia Country Risk Report

Providing comprehensive data and in-depth analysis of political, financial and economic risk.

Report includes: BMI's Core Views, 10-year Forecasts, BMI's Economic Risk Index, Political Stability and Risk Index, Long-term Political Outlook, Operational Risk Index, SWOT Analysis and Structural Economic Sections

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  • Understand and measure the political, business environment and operational risks to your company
  • Gain insight on emerging trends that could support, strengthen or disrupt your activities in the market
  • Benefit from 10-year macroeconomic forecasts and insight into the structural characteristics of the economy
  • Get the long-term political outlook and explore possible scenarios for change
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Russia Country Risk Report
Product Price
$1,195.00

Core Views

  • President Vladimir Putin's popularity remains near record highs, although we expect this to moderate as economic hardship continues to to be realised by the general public. Despite the deterioration in living standards, we do not expect any mass uprising in response to the deteriorating economy.

  • Persistently low oil prices, fiscal austerity, weak investment growth and declining real incomes will lead to second consecutive real GDP contraction of 0.7% in 2016, followed by only a modest recovery to 1.5% growth in 2017.

  • Russia's long-term growth potential is subdued, closer to that of mature developed economies rather than a higher growth emerging market. This is due to the highly centralised nature of the economic model and large government footprint in key sectors, reliance on energy exports, poor business environment, weak investment growth and lack of structural reform momentum.

  • Russia's external position will remain a bright spot for the economy despite a fall in the price of its main commodity exports, with the current account surplus remaining in relatively robust surplus in the coming years as imports remain subdued. Over the coming quarters we expect little financing pressure to emerge in the economy as its large international reserves position remains sufficient to entirely cover maturing external obligations during 2016/2017.

  • While Russia's fiscal position is bolstered by very low public debt ratios and fiscal reserves at its disposal, the sovereign profile will deteriorate in the coming years and major fiscal reforms - such as an overhaul of the pension system - will be necessary to ensure long-term sustainability of the public finances in light of lower commodity prices.

Major Forecast Changes

  • We maintain our real GDP growth forecast for 2016 at 0.5%. Although we have downgraded our forecast for 2017 from 2.3% to 1.5% y-o-y as lower oil prices will prolong a recovery in the Russian economy.

  • With inflation proving sticky and oil price declines keeping depreciatory pressure on the rouble , we now expect monetary easing to proceed at a slower pace. We have revised up our end-2016 forecast to 9.00%, from 7.00% previously.

  • With oil price declines at the start of 2016 rendering the government's budget assumptions unrealistic, we have increased our budget deficit forecast from 2.8% to 4.0% of GDP in 2016.

Key Risks

There is virtually no risk of a sovereign credit event occurring in Russia due to high FX reserves and low debt ratios. That said, growth drivers will be elusive in the absence of much higher oil prices or a significant ramp up in structural reform momentum, neither of which looks probable in the coming years. Instead, risks are tilted towards a weaker growth than we currently are forecasting, given the potential for oil prices to undershoot our already below consensus forecasts.

Macroeconomic Forecasts (Russia 2014-2017)
Indicator 2014 2015e 2016f 2017f
National Sources/BMI
Real GDP growth, % y-o-y 0.6 -3.7 -0.7 1.5
Nominal GDP, USDbn 1,850.7 1,335.6 1,136.8 1,294.6
Consumer price inflation, % y-o-y, eop 11.4 12.9 8.5 5.5
Exchange rate RUB/USD, eop 60.74 72.85 70.00 73.50
Budget balance, % of GDP -0.5 -2.7 -4.0 -3.4
Current account balance, % of GDP 3.2 4.9 4.3 3.6
Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks
5
Chapter 1: Economic Outlook
7
SWOT Analysis
7
BMI Economic Risk Index
7
Economic Growth Outlook
8
Recovery Delayed Amid Slumping Oil Prices
8
GDP By Expenditure Outlook
10
TABLE: GDP GROWTH FORECASTS
10
TABLE: PRIVATE CONSUMPTION FORECASTS
10
TABLE: GOVERNMENT CONSUMPTION FORECASTS
10
TABLE: FIXED INVESTMENT FORECASTS
11
TABLE: NET EXPORTS FORECASTS
11
External Trade And Investment Outlook
11
External Position Remains Bright Spot
11
Outlook On External Position
13
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
13
TABLE: TOP FIVE IMPORTS SOURCES AND PRODUCTS IN 2014
14
TABLE: TOP FIVE EXPORT DESTINATIONS AND PRODUCTS IN 2014
14
Fiscal Policy And Public Debt Outlook
15
Sovereign Profile Deteriorating Further In 2016
15
TABLE: BUDGET EXPENDITURES BY FUNCTION, % OF TOTAL
16
Structural Fiscal Position
17
TABLE: MAIN REVENUE & EXPENDITURE CATEGORIES
17
Monetary Policy
18
Monetary Easing Delayed Until H216
18
TABLE: MONETARY POLICY FORECASTS
18
Monetary Policy Framework
20
Currency Forecast
21
RUB: Rallying With Oil In H216
21
TABLE: BMI CURRENCY FORECAST
21
Chapter 2: 10-Year Forecast
23
The Russian Economy To 2025
23
Structural Deficiencies Weighing On Growth Potential
23
TABLE: LONG-TERM MACROECONOMIC FORECAST
23
Chapter 3: Political Outlook
25
SWOT Analysis
25
BMI Political Risk Index
25
Domestic Politics
26
Economic Woes Sapping Government Support In 2016
26
TABLE: POLITICAL OVERVIEW
26
Regional Politics
28
The Syrian Conflict In A Global Context
28
Long-Term Political Outlook
30
Putin Facing Far Greater Challenges Over 2016-2025
30
Chapter 4: Operational Risk
35
SWOT Analysis
35
Operational Risk Index
35
Operational Risk
36
Trade Procedures And Governance
36
TABLE: OPERATIONAL RISK
36
TABLE: EMERGING EUROPE - TRADE PROCEDURES AND GOVERNANCE RISK
37
Vulnerability To Crime
38
TABLE: EXPORT AND IMPORT DOCUMENTS
38
TABLE: TRADE PROCEDURES BREAKDOWN
38
Chapter 5: BMI Global Macro Outlook
41
Global Macro Outlook
41
Downside Risks Gather Momentum
41
TABLE: GLOBAL ASSUMPTIONS
41
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
42
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
42
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
43
TABLE: MACROECONOMIC DATA & FORECASTS
45

Assess your risk exposure in Russia with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Russia with confidence.

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