3 SIGNS RUSSIAN ECONOMY IS RECOVERING
3 SIGNS RUSSIAN ECONOMY IS RECOVERING
The price of oil, is the main engine of the economy of Russia, but has declined significantly in the last 18 months, while the United States imposed sanctions against Russia following the joining of Crimea in Ukraine, in response, the ruble Russian currency reduced its commercial value, so the capital began to leave the country because citizens deposited their money in banks located abroad, it seemed as if the economy was spiraling downward.
Nevertheless, contrary to expectations, the Russian economy is starting to recover, with an exponential increase in the yield of domestic enterprises, increasing import prices and the devaluation of the ruble, Russia's economy has begun to recover itself.
PERFORMANCE OF NATIONAL ENTERPRISES
The Russian market is one of the best performing markets this year, according to reports, approximately 78% of Russian companies in the MICEX index showed a higher revenue growth in the latest quarter to global peers, Russian companies are also now more profitable world companies in the MSCI Emerging Markets Index.
For example, the Russian steel SEVERSTAL recorded their highest profit margins in six years of high performance, in April 2015 month, the company signed a contract for the supply of steel to the automobile plant Renault-Nissan, which is expected Russia increase exports to the former Soviet Union, Africa and the Middle East.
Economists have been predicting that every $ 10 drop in oil prices reduced the gross domestic product of Russia (GDP) by approximately 2%. However, Russia's GDP, after declining for about 18 months, is expected to grow by approximately 3.5% per year, even without increases in oil prices.
RUBLE DEVALUATION AID PERFORMANCE
The historic decline in gross domestic product of Russia's GDP in the last 18 months has caused the Russian currency lost almost half its value against the US dollar. Other decreases in oil prices, which may be imminent due to the decision of Saudi Arabia to pump record amounts of crude oil, the ruble will stop the recovery in the short term.
For companies like Severstal dedicated to export about 30% of its steel, devaluation is beneficial, all costs involved in Russian steel production are priced in rubles, the Russian company costs in connection the costs of their international competitors have declined significantly, on the other hand, any steel that Russian companies exported abroad is priced in US dollars or euros, which have strengthened in value against the ruble, when the company derives its revenues in currency foreign, you can buy rubles more effectively through favorable exchange rates of currencies.
This benefit also applies to the energy sector, the country exports large amounts of gas and oil to countries that use the euro or the dollar, that's partly why Rosneft, a multinational producer oil in Russia, reported an increase revenue from 18% last year, compared with an increase of less than 1% of its international competitors.
This is a big reason why tax revenues Russia has not decreased over time, mitigating more pain for the economy, oil production in Russia remains near record highs, however, which it has caused oil prices remain low.
INCREASED PRICES OF IMPORTS
In addition to the performance of the ruble to help the company, but also increases the price of imports from Russia, this provides economic benefits as national import substitutions that consumers buy instead of options important goods more expensive this allows the Russians to save more money and help the economy to increase its GDP.
A similar recovery occurred in 1998, when the Asian financial crisis spread to Russia; the country defaulted on its international debt and subsequently devalued the ruble currency, there was an immediate negative economic response is not long in coming, followed by a recovery of import substitution that was more successful than most economists believed the same It should happen in the current environment.
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