Russia Country Risk Report

Published 27 May 2015 | Quarterly

  • 56 pages
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  • Includes 3 free updated quarterly reports
$1,195.00
Russia Country Risk Report

Core Views

  • President Vladimir Putin's popularity remains near record highs. We expect this to suffer moderate declines as the reality of economic hardship beings to be realised by the general public. Despite the deterioration in economic conditions and high inflation we do not expect any mass uprising in response to the deteriorating economy.

  • Prolonged lower oil prices during 2015 will have a negative impact on economic activity. High inflation will negatively affect consumer's purchasing power resulting in a reduction in private consumption.

  • This reduction in private consumption is reflected in our balance of payments forecast. Though we expect exports to decrease, due to a significant fall in imports we expect to see a current account expansion during 2015.

  • Monetary policy will remain relatively tight during 2015. A decrease in the rate of inflation in H215 will allow for monetary easing. The monetary authority will be eager to reduce rates so as not to inhibit economic activity and stifle the banking sector with high borrowing costs.

Major Forecast Changes

  • Following a strong performance by the rouble in Q115 we revised our average forecast for the year. We now forecast the currency to average RUB58.00/USD during 2015. We expect the currency to average RUB58.25/USD in 2016.

  • The aggressive monetary easing by the Central Bank of Russia has warranted an adjustment of our end-2015 policy rate forecast. We now expect the CBR to cut rates to 9.00% and end-2015. We expect them to reduce this to 5.50% by end-2016.

  • Owing to the sharp reduction in imports we now expect the current account balance to expand to 4.0% of GDP in 2015 up from 3.3% previously. After this we see it decreasing to 3.5% of GDP in 2016.

Key Risks To Outlook

The trajectory of the rouble remains the key risk to our macroeconomic forecasts. Since much of Russia's exports are paid for in dollars, a major change in the value of the rouble has the potential to affect our balance of...

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Social Stability To Remain In Check
8
TABLE: Political Overview
8
Foreign Policy
10
Conflict Scenarios: Escalation Risks Still High, Despite 'Ceasefire'
10
Long-Term Political Outlook
13
Putin Facing Far Greater Challenges Over 2015-2024
13
Chapter 2: Economic Outlook
17
SWOT Analysis
17
BMI Economic Risk Index
17
Economic Activity
18
Sharp Adjustment Necessary For Growth To Return
18
TABLE: Economic Activity
18
Fiscal Policy
20
Strained Fiscal Position To Remain
20
TABLE: Fiscal Policy
20
Monetary Policy
21
Monetary Easing Set To Continue
21
TABLE: Monetary Policy
22
Exchange Rate Policy
23
Early Strength To Give Way
23
TABLE: BMI RUSSIA CURRENCY FORECAST
23
Balance Of Payments
25
Current Account To Narrow In 2016
25
TABLE: Current Account
25
Chapter 3: 10-Year Forecast
27
The Russian Economy To 2024
27
Structural Deficiencies Weighing On |
27
TABLE: Long -Term Macr oec onomic Forecasts
27
Chapter 4: Operational Risk
29
SWOT Analysis
29
Operational Risk Index
29
Operational Risk
30
TABLE: Operati onal Risk
30
Legal Environment
32
TABLE: Emerging Europe - Legal Risk
32
Costs Of Labour
36
TABLE: Emerging Europe - Labour Cost Risk
36
TABLE: Average Annual Wage By Sector (Russian Rouble )
37
TABLE: Regulations Governing Flexibility of Workforce
38
Chapter 5: Key Sectors
41
Defence & Security
41
TABLE: Defence Expenditure
42
Freight Transport
44
TABLE: Rail Freight
46
TABLE: Road Freight
46
TABLE: Inland Waterway Freight
46
TABLE: Air Freight
47
TABLE: Maritime Freight
47
Other Key Sectors
49
table : Autos Sector Key Indicators
49
Table : Pharma Sector Key Indicators
49
Table : Oil & Gas Sector Key Indicators
49
Table : Telecoms Sector Key Indicators
50
Table : Food & Drink Sector Key Indicators
50
Table : Infrastructure Sector Key Indicators
50
Chapter 6: BMI Global Macro Outlook
51
Global Outlook
51
EMs Still Slowing
51
Table : Global Assumptions
51
Table: Developed States, Real GDP Growth, %
52
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
52
Table : Emerging Markets , Real GDP Growth, %
53

The Russia Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Russia. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Russia's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of Russia's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Russia's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Russia, including currency volatility, the commodity price boom and protectionist policies.

The Russia Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Russia' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Russia through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Russia Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Russia and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Russia, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Russia over the next 5-years?

BMI's Russia country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Russia Market - Political Strengths, Weaknesses, Opportunities and Threats facing Russia.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Russia's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Russia’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Russia's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Russia?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Russia against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Russia’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Russia will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Russia's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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