Macroeconomic development

In 2015 the global economy growth rate remained low with emerging markets growth slowing for the fifth consecutive year. Global performance was determined by three key developments, all having taken root in the preceding years:

  • Low prices for oil, metals and other commodities. The oil price has been fluctuating from a range of US$ 45-65 per barrel plummeting by January 2016 to just US$ 30 per barrel, which is the lowest price in the last 12 years.
  • The Chinese economy has demonstrated a gradual slowdown with an adjustment of domestic economic activity away from investment and manufacturing towards consumption and services.
  • A combination of gradual tightening of monetary policy in the USA with monetary easing in the Eurozone and Japan. This is in addition to concerns about emerging market growth prospects that have led to declining FDI capital flows and further depreciation of currencies in several emerging markets.

Global economic growth in 2015 has decreased by 0.3% to a level of 3.1% due to the slowdown in growth of developing countries. Growth in most of the advanced economies has increased. Manufacturing activities and trade globally remained weak.

In Russia the year was marked by strengthening of the ongoing economic crisis and further worsening of the investment climate. The causes of the crisis have remained unchanged since the previous year:

  • Low level and high volatility of oil prices (oil, gas and oil products still represent more than 55% of Russian exports).
  • The continuing international sanctions on the Russian financial, oil production, and military machinery industries, with a reciprocal embargo on food imports from the EU and USA.
  • The strengthening of economic stagnation due to the exhaustion of growth potential of the previous economic model of 2000-2013 (which was based on the continuous growth of oil products and low cost of energy, raw materials and labour, the availability of sources of relatively cheap financing and initially low saturation level on consumer markets)

The Russian economy stayed in recession, shrinking by 3.7% in 2015 (compared to 0.7% growth in the previous year). The economy has not shown any signs of rapid recovery and quarter-by-quarter decline amounted to -1.2%, -1.3%, -0.6% and -2.3% correspondingly in Q1, Q2, Q3 and Q4.

The Russian ruble continued to depreciate, dropping by 30% to US$ and by 11% to EUR (RUB/US$: from 56.24 to 72.88; RUB/EUR: from 72.08 to 79.95). The current account of national balance of payments has strengthened slightly from US$ 58.4 billion in 2014 to US$ 65.8 billion in 2015, mainly due to the sharp decrease in capital outflow from Russia from US$ 153 billion in 2014 to US$ 57 billion in 2015. At the same time, the balance of trade of goods and services has decreased from US$ 190 to US$ 46 billion due to the drop in prices for export commodities and contracted internal demand for imported goods.

As capital outflow has been slowing down and pressure on the rouble easing, the Bank of Russia has consistently been decreasing the key interest rate, which is used to provide liquidity in roubles to all Russian commercial banks and via them to other sectors of the economy. The interest rate was decreased several times from 17.0% in December 2014 down to 11.0% in August 2015 and remained at this level up to the end of the year. This measure has contributed to some stabilisation of the cost of financing for all Russian companies and private individuals. Nevertheless, the interest rate remained very high (compared to pre-crisis levels) and, also considering the recession in the economy, the overall corporate demand for financing has decreased substantially. The total sum of credit issued by banks to corporate borrowers has decreased by 11% in comparison to 2014, from 232 trillion rubles to 207 trillion rubles. The structure of the overall credit portfolio has shifted from short-term loans to long-term credit, resulting in a 9% increase in the national corporate debt load from 26.8 trillion rubles in December 2014 to 29.3 trillion rubles in December 2015.

Recession in the real sector has been reflected on the Russian stock market, where the RTS index (based on market capitalisation in US$) has failed to show any sustainable positive trend, despite its high volatility throughout the year; by the end of the year it was at the same 750 points as it was in January 2015. At the same time, the MICEX index (based on market capitalisation in rubles) has increased from 1,450 points in January to 1,750 points in December (a 22% increase).

Real domestic consumption in Russia decreased by 7.9% in 2015 (compared to the 0.6% growth of the previous year). Investment in fixed assets has decreased by 8.4% and constituted ~18% of GDP.

Russia experienced a 3.4% decline in industrial output in 2015 (1.7% growth in 2014). Minor growth (+0.3%) was observed only in the raw materials extraction sector, while manufacturing has decreased by 5.4%. Positive dynamics were demonstrated only in the Chemicals, FMCG and Oil products production sectors. Production of industrial equipment and machinery was among the worst performing industries, with a decline of 11.1% for the year. Energy, gas and water production, and transportation decreased by 1.6%. The profitability of the absolute majority of producers of industrial products has further declined across all industrial segments.

Inflation (Consumer Price Index) in Russia has increased slightly in 2015 to an even higher level of 12.9% (in 2014 it was 11.4%) due to the lagged effects of both ongoing devaluation of the rouble and the Russian embargo on the import of food products from the EU. At the same time, the Industrial Goods Producers Price Index has increased by only 10.7%, which reflects the recession in the local economy.

Real wages in Russia have decreased by an average of 9.5%, while the real disposable income of the population has decreased by 6.3%. The nominal unemployment rate has increased slightly from 5.3% in December 2014 to 5.8% in December 2015.

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