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3 Jun, 2009 18:03

St Petersburg Forum to highlight Russian economy

The economic crisis might have made the St. Petersburg economic forum more modest. But the 3-day event will promote Russia as one of the world’s leading investment destinations.

The 2009 St. Petersburg International Economic Forum is unlikely to match the $14.5 billion worth of deals signed off in 2008. The global financial crisis, and ensuing economic downturn, mean that Russia’s premier investment showcase will present a different economy to global investors with a different outlook. Russian Presidential Aide, Arkady Dvorkovich believes this years forum will be more about cultivating longer term investors.

“We believe that foreign investors' behavior is quite prudent and stable right now. There is no outflow of investment from Russia, and we know many companies have further plans to invest into the Russian economy including financial sector, manufacturing, energy, as well as services – retail, in particular.”

The forum’s timing comes against the background of a stunning turnaround in the Russian stockmarkets, which have replicated the 80% gain in the crude price since late January. At the same time the Russian Rouble, which the Central Bank was propping up at the end of winter, is now being held back from rebounding too far, with Russia’s fiscal reserves again on the rise.

But the febrile nature of recent gains was underlined by Wednesday’s 7% slump in Russian stocks, amidst increasing doubt about whether the rallies in shares, crude or the Rouble can be sustained.

Senior government officials and business leaders, acutely aware the upturn in fortune of the first half could prove short lived, need to lock in the gains and convince investors stability and growth is returning.

Investment analyst, James Brooke, believes it’s vital the government demonstrate it is still committed to market reforms, with the economy still predicted to contract by as much as 6% this year.

“In this time of crisis investors are coming to work not to play. What they are afraid of is that oil has gone up, stock market is up, the rouble strengthens…and people fear that maybe the pressure is off and that the government will kick back in complacency and will not go forward with open market reforms.”

The forum will see President Medvedev meet national leaders, in addition to the heads of 20 of the worlds top energy companies and corporate chiefs from across the business spectrum. He and other Russian business leaders will be looking to cultivate an increasingly longer term and more stable perception of Russia’s economic outlook and prospects for doing business in and with Russia. With the obvious example of Nissan’s new St Petersburg plant a shining example of the benefits for both Russia and investors of committing to a longer term relationship, and with Russia still seen as one of the great untapped markets for a range of goods and services, this years St Petersburg Forum may well be more low key, but offers every bit as great an opportunity for a durable result.