Russian officials have learnt all the right lessons from previous crises, and their response to the recent low oil prices and economic sanctions will result in the greater strengthening of the Russian economy, according to Yossi Dayan, head of markets for BCS Global Markets.
“That Russia is already adjusting to this radically changed landscape is an early sign of the gains to be had from seizing the new opportunities,” Yossi Dayan writes in his article for The Telegraph.
First of all, it was the decision in November 2014 “to float the ruble, which has allowed the currency to take the hit in terms of absorbing much of the market response to the crisis.”
Yossi Dayan reminds that it has fallen from an average 31.9 rubles to the US dollar in 2013 to an average 61 rubles to the dollar in 2015.
“This is set to bolster Russia’s trade balance, from $143.9 bln in 2015 to a forecast $148 bln in 2016 and $173.1 bln in 2017,” he argues.
Of course, it is not “a cost-free option,” he adds, and has already resulted in higher price rises and a consequent reduction in living standards.
“Under the auspices of the Central Bank of Russia, the Moscow Exchange was strengthened to give the country its own, world-class financial-system capability,” the author explains.
The results of this reform can be seen in the net profits of the finance sector, which having fallen 1.6 percent below their 2008 level in 2014, bounced back strongly to record an estimated 660.6 percent in 2015.
This view was echoed on Tuesday by Russian Foreign Minister Sergei Lavrov, who reiterated that Russia views the economic restrictions imposed against it as a “window of opportunity that must be used to strengthen food and technological security, as well as to diversify Russia’s economy, broaden foreign trade channels and create alternative financial accounting systems.”
“I would say that the issue of when the anti-Russian sanctions are lifted is irrelevant for us. It was not us who imposed sanctions and we will not discuss any criteria or conditions. The only issue relevant for us is how efficiently we use the current situation in the interests of our economy and development,” Lavrov said during a live linkup on kp.ru news portal.
World Bank’s latest forecast predicts the fall of GDP in 2016 to be 1.2 percent instead of the previously projected 1.9 percent. According to the bank, Russia’s GDP will grow by 1.4 percent in 2017 and by 1.8 percent in 2018.
The Russian economy is adjusting to the new environment better than expected, says Sergei Khestanov, an associate professor of the Department of Finance and Banking at the Russian Presidential Academy of National Economy and Public Administration.
According to him, the free float of the ruble, which led to the devaluation of the national currency, has become one of the main tools of adaptation. Thus, a free-floating exchange rate has become a stimulus for the growth of exports and import substitution.
“According to recent data, 43 percent of the budget comes from export earnings, which are calculated in dollars,” said Khestanov. “Moreover, almost all the costs are in rubles, which is quite effective in reducing the budget deficit.”
According to the World Bank experts, there are tentative indications that the decline in some sectors may be bottoming out: “Industrial production is recovering, despite shrinking investment and restricted access to external financing for Russian firms.”
The adaption of the Russian economy to difficult conditions is demonstrated by a “qualitative growth in agriculture, chemical and food industries,” said Stanislav Novikov, the BKS Financial Group’s deputy chairman in charge of retail business.
In May 2015, Bloomberg described all three of these industries as “new growth drivers” for Russia.
The share of agriculture to GDP rose to 4.4 percent, the highest since 2003, Bloomberg notes.
“In my opinion, the forecast for Russia’s GDP may be even more optimistic – perhaps, in the absence of shocks, our economy will already be able to show a symbolic growth at the end of this year,” said Novikov.