Russian economy revives despite sanctions - media
Global investors appear to be optimistic about the future of Russian corporations, as the country’s economic performance provides evidence to recovery, says Bloomberg analyst Matthew Winkler in his article.
Those who invested in ruble-denominated government securities this year have already made a profit equivalent to seven percent in dollar terms, while those who invested in government bonds of other developing countries lost more than one percent from January, he says. The holders of corporate bonds gained even more with a 7.3 percent return in 2015, which leads the index for emerging market corporate bonds compiled by Bloomberg.
The 50 Russian stocks in the MICEX are up 11.9 percent this year, which is better than any North American market, and that, according to analysts, shows confidence is starting to return.
Russian companies were more profitable measured by their Ebitda margins (earnings before taxes, depreciation and amortization) than the rest of the global MSCI Emerging Market Index. Around 78 percent of enterprises represented in the MICEX index showed a greater increase in sales than their counterparts around the world.
For instance, Novatek OAO, a $22.8 billion independent producer of natural gas in western Siberia, saw its sales increase 19.5 percent, compared with 0.76 percent from the sector globally. Oil major Rosneft with a capitalization of $41 billion and production in western Siberia, Sakhalin, the North Caucasus and the Arctic, reported an 18.26 percent annual sales growth, while its international competitors having shown an increase in revenue of just 0.76 percent.
However, the pace of economic recovery strongly depends on investment demand, according to Russian Finance Minister Anton Siluanov. The finance ministry estimates the country’s GDP will fall by roughly three percent in 2015.
At the same time the Russian response to Western sanctions, such as the food embargo, have also proved successful in boosting domestic growth with local consumers preferring homegrown products and services, economist Paul Craig Roberts told RT.
“The sanctions have helped Russian companies, and, more generally, sanctions have helped the overall economy by creating import substitution,” he said adding that in this case he doesn’t see any reasons for the Russian ruble to plunge deeper.
“I don’t think the ruble is unstable for real economic reasons. It was created by the belief that all this money would flow out of Russia and leave Russia. But money doesn’t flow out of countries that have extremely low debt and strong export earnings.”
The ruble, which last year became the world's most volatile currency after the dramatic plunge in oil prices and the imposition of sanctions over Ukraine, is stabilizing. The fluctuations in its value narrowed in 2015 more than any of the other 30 most-traded currencies.
Last week Anton Siluanov said the Russian economy is over the worst and is heading towards recovery with the ruble becoming less dependent on changing oil prices. The finance ministry doesn’t expect any dramatic swings in the ruble’s exchange rate in the short-term.