Russia in the Global Economy: Challenges ahead Bikas Joshi Resident - - PowerPoint PPT Presentation

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Russia in the Global Economy: Challenges ahead Bikas Joshi Resident - - PowerPoint PPT Presentation

Oct 30, 2022 39 likes •243 views

Russia in the Global Economy: Challenges ahead Bikas Joshi Resident Representative International Monetary Fund Moscow, Russia October 15, 2014 The WEO forecast has been revised down, New mediocre mainly on account of emerging

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Russia in the Global Economy:

Challenges ahead…

Bikas Joshi Resident Representative International Monetary Fund Moscow, Russia October 15, 2014

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The WEO forecast has been revised down, mainly on account of emerging economies

8

“New mediocre”

(WEO Real GDP growth projections)

World U.S. Euro Area Japan Brazil India China Russia 2014 (October 2014) 3.3 2.2 0.8 0.9 0.3 5.6 7.4 0.2 2014 (April 2014) 3.6 2.8 1.2 1.4 1.8 5.4 7.5 1.3 2015 (October 2014) 3.8 3.1 1.3 0.8 1.4 6.4 7.1 0.5 2015 (April 2014) 3.9 3.0 1.5 1.0 2.7 6.4 7.3 2.3

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The WEO forecast has been revised down, mainly on account of emerging economies

8

What about Emerging Markets?

World Advanced economies EMDC EM Asia EM Lat Am EM Europe CIS

2014 3.3 1.8 4.4 6.5 1.3 2.7 0.8 Revision from April 2014

  • 0.3
  • 0.4
  • 0.5
  • 0.2
  • 1.2

0.3

  • 1.5

2015 3.8 2.3 5.0 6.6 2.2 2.9 1.6 Revision from April 2014

  • 0.1

0.0

  • 0.3
  • 0.2
  • 0.8

0.0

  • 1.6
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Forecast errors in EM growth: 2011-14

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Sources of Russian growth

  • 8
  • 6
  • 4
  • 2

2 4 6 8 10 12 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010 2011 2012 2013 2014 Statistical discrepancy Net export Inventories Fixed capital formation Final consumption GDP

Contributions to GDP growth

(percent year-on-year)

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Domestic headwinds

0% 2% 4% 6% 8% 10% 12% 14% 5.0% 5.5% 6.0% 6.5% 7.0% Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14

real wages, y/y unemployment, SA (% labor force)

  • 4

4 8 12 16

  • 4

4 8 12 16 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14

headline inflation monthly inflation (annualized and seasonally adj)

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Headwinds: Financial markets

1200 1300 1400 1500 1600 4 5 6 7 8 9 10 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 CEMBI Russia Yield LT Sovereign Bond Yield MICEX, rhs

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Headwinds: Financial markets

90 100 110 120 28 30 32 34 36 38 40 42 Dec-13 Feb-14 May-14 Jul-14 Oct-14

Exchange Rate and Oil Price

Ruble per U.S. dollar Brent price, rhs

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Russia and the world

  • 150
  • 100
  • 50

50 100 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2008 2009 2010 2011 2012 2013 2014 US$ billions

current account capital and financial account net of change in reserves increase in reserves

Components of the Balance

  • f Payments

(in billions of US$)

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Private sector capital flows

(in USD billions)

  • 60
  • 50
  • 40
  • 30
  • 20
  • 10

10 20 30 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2013 2014 banks corporates net

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Geopolitics and external debt

56 214 433 63 274 234 100 200 300 400 500 Government Banks Corporations

Russia: External Debt and Assets (USD bn)

External debt External assets

  • 100

100 200 300 400

  • 100

100 200 300 400 2005 2006 2007 2008 2009 2010 2011 2012 2013

Maturity Composition of Non-Banks' Net Debt (USD bn)

Long-term debt Short-term debt Net external debt position

24 33 19 10 9 19 9 257 0.0 50.0 100.0 150.0 200.0 250.0 300.0 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 >Q116

Refinancing Profile of Non-Banks (USD bn)

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Geopolitics and external debt

5 10 15 20 25 30 35 40 45 50 Sberbank VTB VEB Gazprombank RAB Novatek Rosneft

Maturing Debt Profile and Cash in Hand of Sanctioned Corporates (Billions of U.S. dollars)

Cash 2014 maturing debt 2015 maturing debt 2016+ maturing debt

100 200 300 400 500 600 700 100 200 300 400 500 600 700 Reserves 2014 2015 >2016

CBR Reserves and External Debt Amortization (Billions of U.S. dollars)

Banks Government Corporates

USD 51% RUB 34% EUR 9% Other 6%

Currency Structure of Marketable Corporate Debt

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Monetary policy: extraordinary times

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IDN BRA MEX HUN ROM POL RUS TUR ZAF PHL THA CHL COL PER IND

  • 1.5
  • 1.0
  • 0.5

0.0 0.5 1.0 1.5 2.0

  • 2
  • 1

1

Output Gap 2014 Inflation Gap

Demand-management policies?

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Monetary policy stance Road to a credible inflation targeting framework Emphasis on financial stability Role of flexible exchange rates

Monetary policy considerations

Liquidity measures?

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Containing risks. Encouraging intermediation

Financial sector developments

10 20 30 40 50 10 20 30 40 50 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14

18 11 13

Credit growth, y/y

households total corporates

10 20 30 40 50 60

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Consumer loans Auto loans Mortgage loans Housing loans Retail credit growth

Drivers of retail credit growth, y/y

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Developments in deposits

  • Rub. bn.

% of total % of GDP

  • Rub. bn. % of total % of GDP

Total deposits

32,795 49 34,380 49

Rub

22,932 70 34 23,834 69 34

FX

9,863 30 15 10,546 31 15

Households

16,958 25 16,883 24

Rub

14,001 83 21 13,699 81 20

FX

2,957 17 4 3,184 19 5

Non-financial enterprises

10,838 16 11,976 17

Rub

6,372 59 10 6,944 58 10

FX

4,467 41 7 5,031 42 7

Credit institutions

4,806 7 5,339 8

Rub

2,370 49 4 3,013 56 4

FX

2,437 51 4 2,326 44 3

Individual entrepreneurs

193 182

Rub

190 99 178 98

FX

3 1 4 2

as of 08/01/2014 as of 01/01/2014

5 10 15 20 25 30 35 5 10 15 20 25 30 35 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14

Deposit growth, y/y

7 10

Rub and FX deposits Rub deposits

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Banking sector

2 3 4 5 6 7 8 9 10 11 12 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14

credit to corporates up to 1 year interbank overnight rate household deposits up to 1 year Interest rates, percent 3 4 4 5 5 6 6 7 7 8 Jan-11 Jan-12 Jan-13 Jan-14 Retail Corporate Total Overdue loans, percent of total loans

5.7 4.3 4.7

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Fiscal rule remains an important anchor

5 10 15 5 10 15 2007 2010 2013 2016 2019 Reserve Fund Target (7 percent of GDP)

Reserve Fund (as percent of GDP)

Privatization Risks to the fiscal outlook Further pension reforms

Fiscal policy challenges

Infrastructure expenditure

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Improvements in the policy framework

Prospects and Challenges

… but structural slowdown, amplified by geopolitics Near-term Medium-term Uncertainty—effect on (ample) buffers? Stable and credible macro frameworks as policy anchor Structural reform agenda remains key Diversification through integration Policy responses to avoid distortions