Vienna Process
6th Meeting
What is new on the business
climate in Russia
Mikhail Dmitriev
President of the Center for Strategic Research
Vienna
27 February 2013
1
Like the rest of the world economy,
Russian faces high macroeconomic
uncertainty in the longer run
Long-term growth scenarios by the Ministry of Economy
2
Source: MED
In 1H 2012 Russia’s growth rates were
above average for developing
economies
Russia
OECD
developing Europe
Other developing
3
Source: the World Bank
3
But output recovery is uneven
Manufacturing
Industrial production
Mining
Water, gas and power generation
4
Sources: Rosstat, Gaidar Institute
4
With adjustments to crops fluctuations
Russian economy was slowing down
just as the rest of the world
World
Russia actual
Стандартный
Source: HSBC, World Bank
Russia,
crops’ adjusted
С поправкой
на урожай
5
5
HSBC forecast comes true:
slowdown continues
HSBC GDP growth forecast for 2013: 2,5%
6
Изменение ВВП в %
к аналогичному
GDP
growth, yoy кварталу предыдущего
года
5
4
3
2
1
0
I кв. 2012
II кв. 2012
III кв. 2012
IV кв. 2012
I кв. 2013
II кв. 2012
III кв. 2012
IV кв. 2012
6
Source: HSBC
6
Растет в основном
сфера услуг
7
Источник: Всемирный банк
7
•
•
•
•
Consumer demand –the key driver of growth
Since 2004 domestic consumption contributed 80% of GDP growth
By 2020 Russia may become the largest consumer market in Europe
By 2025 Russia’s consumer market may reach $3 trln
Equity of Russia’s consumer sector companies are discounted by
25-50% to the peers in BRICS and Turkey
Aggregate demand
Statistical deviation
Change of inventories
External demand
Domestic demand
GDP growth
8
But consumer confidence is still in the
negative zone
CENTER
FOR STRATEGIC
RESEARCH
Source: Rosstat
9
Procyclicality of growth:
potential for new bubbles
Jan-June 2011
Jan-June 2012
Agriculture and forestry
Mining
Manufacturing
Jan-June 2011
Industrial services
Trade
Finance
Jan-June 2012
Construction
Transportation and
telecommunications
Real estate
10
Source: the World Bank
10
Labor market is overheated
• Unemployment has fallen to the lowest levels for the last 20 years
• Wages grow ahead of productivity
Unemployment
Seasonally adjusted
General
Real wages (%)
Tradable sector
Non-tradable sector
Non-market sector
Source: Rosstat, the World Bank
11
Problems for new investments:
Labor supply declines
Annual average growth projections for working age population
USA
EU-15
Japan
Russia
12
Source: The Economist, CSR
12
Two generations of baby-boomers
10-year cohorts
From
to
Year
100 and above
Total
Source: CSR
13
Consumption boom is heavily
reliant on banking loans
Share of bank loans in household
consumption (%)
Source: Gaidar Institute
14
Consumer confidence remains in the
negative
CENTER
FOR STRATEGIC
RESEARCH
Consumer confidence index
Source: Rosstat
15
Russia and many of its regions was
successful in improvements of its
business environment
Russia is among 30 of the most successful among 167 countries,
which were improving doing business during the last 7 years
Ownership
registration
Registration
Of firms
Enforcement Taxation
of contracts
Insolvency
resolution
Source: the World Bank
Investor’s
protection
International Access to Construction
trade
credit
permists
16
16
Doing Bisiness-2012: Russia is the only BRIC
which made progress
Россия входит в число 30 наиболее успешных стран из 167 государств,
добившихся улучшения условий ведения бизнеса за последние 7 лет
China
Russia
Brazil
India
17
Источник:Всемирный банк.
17
Regional variatioты in business climate (BEEPS survey)
CENTER
FOR STRATEGIC
RESEARCH
Source: EBRD
18
Historically Russia was rather
successful in attracting FDI
19
Source: KPMG
19
FDI spread unevenly across the
regions
Source: KPMG
20
20
Net capital outflow:
363 bln $ US in 5 years
• Net outflow has been typical even for the FDI
• Share of foreigners on domestic equity market has declined
from 70% in 2007 to little more than 50% in 3Q2012
• Structure of capital outflows and inflows is asymmetrical
•
Inflows – loans and bonds
•
Outflows – equity investments
•
Russia has the 4th largest and fastest growing venture market
in Europe
Portfolio investments
Net capital outflow
FDI
Other
Source: the World Bank.
21
21
Corporate external debt is increasing
Bln $ US
22
Source: the World Bank
22
Since 2009 Global equity markets
are closely linked to FRS assets…
MSCI Global (lhs)
FRS assets, bln $US
23
Source: Institute of Energy and Finance
23
… but Russian equity market has
delinked from that of the US:
the gap is now 60%
24
Source: Development Center, HSE.
24
Investments stagnate
CENTER
FOR STRATEGIC
RESEARCH
Investments mom (rhs)
Investments, 2008=100%
Source: Development Center HSE
25
Long term trends:
will the official goals be achieved?
Capex in % of GDP
Share of high-tech industries(%)
Actual trend
Labor Productivity
Official goal
Rank in
«Doing Business”
26
Source: the World Bank
Thank you for attention!
27