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 1.2% 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 have downgraded our real GDP growth forecast for 2016 from -0.7% to -1.2%, for 2017 from 2.3% to 1.5% y-o-y.

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 2015 2016f 2017f
National Sources/BMI
Real GDP growth, % y-o-y 0.7 -3.7 -1.2 1.5
Nominal GDP, USDbn 2,020.2 1,319.4 1,325.9 1,476.0
Consumer price inflation, % y-o-y, eop 11.4 12.9 6.6 5.8
Exchange rate RUB/USD, eop 60.70 72.90 62.00 65.10
Budget balance, % of GDP -0.4 -2.4 -3.5 -2.8
Current account balance, % of GDP 2.9 4.9 4.0 4.1
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
Import Substitution Failing To Boost Growth
8
GDP By Expenditure Outlook
9
TABLE: GDP GROWTH FORECASTS
10
TABLE: PRIVATE CONSUMPTION FORECASTS
10
TABLE: GOVERNMENT CONSUMPTION FORECASTS
10
TABLE: FIXED INVESTMENT FORECASTS
10
TABLE: NET EXPORTS FORECASTS
11
Currency Forecast
11
RUB: Recovery Will Run Out Of Steam In 2017
11
TABLE: BMI CURRENCY FORECAST
11
Monetary Policy
13
CBR Vigilant On Inflation, Will Not Rush To Cut Rates
13
Monetary Policy Framework
14
TABLE: MONETARY POLICY FORECASTS
14
Fiscal Policy And Public Debt Outlook
15
Fiscal Position Now Permanently Weaker
15
Structural Fiscal Position
17
TABLE: MAIN REVENUE & EXPENDITURE CATEGORIES
17
External Trade And Investment Outlook
18
External Surplus A Key Support To Sovereign Profile
18
TABLE: BALANCE OF PAYMENTS FORECASTS
19
Outlook On External Position
20
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
20
TABLE: TOP 5 GOODS IMPORTS
21
TABLE: TOP 5 GOODS EXPORTS
21
Chapter 2: 10-Year Forecast
23
The Russian Economy To 2025
23
Long-Term Economic Stagnation Without Reforms
23
TABLE: LONG-TERM MACROECONOMIC FORECASTS
23
Chapter 3: Political Outlook
27
SWOT Analysis
27
BMI Political Risk Index
27
Domestic Politics
28
Putin To Weather 2016 Election Test; Big Domestic And Foreign Challenges Loom
28
TABLE: POLITICAL OVERVIEW
28
Long-Term Politics Outlook
31
Putin Facing Far Greater Challenges Over 2016-2025
31
Chapter 4: Operational Risk
35
SWOT Analysis
35
Operational Risk Index
35
Operational Risk
36
TABLE: OPERATIONAL RISK
36
Economic Openness
37
TABLE: TOP 5 IMPORT PARTNERS & PRODUCT IMPORTS, 2010-2014, USDMN
38
TABLE: FREE TRADE AGREEMENTS
38
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
40
Availability Of Labour
43
TABLE: EMERGING EUROPE - AVAILABILITY OF LABOUR
44
TABLE: LABOUR FORCE EMPLOYMENT BY SECTOR ('000), 2010-2011
46
Chapter 5:BMI Global Macro Outlook
49
Global Macro Outlook
49
Tentative Stability, But New Risks Emerging
49
TABLE: GLOBAL ASSUMPTIONS
49
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
50
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
51
TABLE: MACROECONOMIC DATA & FORECASTS
53

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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