Russian Economy General News: #4

sepheronx wrote:

KoTeMoRe wrote:I think we have a problem here...

Radio Free Sh** wrote: Russian Prime Minister Dmitry Medvedev said on April 21 that the country's economy has lost an estimated 25 billion euros as a result of Western sanctions and that the losses could be "several times" higher this year.

Speaking in his annual report to parliament on the economy, Medvedev said Russia's gross domestic product dropped by about 2 percent in the first quarter of 2015. That drop, if confirmed, would be Russia's first quarterly contraction since the deep recession of 2009.

Medvedev's assessment of Russia's economic situation was starker and more frank than upbeat comments from President Vladimir Putin, who told the nation on April 16 that the economy was "over the worst."

Medvedev said Russia's losses from sanctions imposed by the European Union, the United States, and other countries over Moscow's interference in Ukraine have been "significant -- we won't hide it," and could get worse.

"For the first time in the history of Russia after the collapse of the U.S.S.R....our country has turned out to be under the influence of two external shocks -- a sharp drop in oil prices and unprecedentedly harsh sanctions pressure," he said. "We've never faced such an array of simultaneous challenges."

So how did that become 75 billion?

And how did he get 2% drop when rosstat figures are not out yet?

KoTeMoRe wrote:

Kimppis wrote:

KoTeMoRe wrote:

Kimppis wrote:So according to Medvedev, the sanctions are going to cost Russia $75 billion this year, which is "around 5% of the GDP". How is that even possible if the economy is going to decrease by 2-4% and even that is mostly due to oil price?

How is 75 billion 5% of Russian GDP? Is this revised rate and if so how does Medvedev knows how 2015 will end?

Because sanctions are offset to a certain amount and losses FROM sanctions are recouped with local production and diversification.

Little example.

I own shop. You are my main supplier. The trade with you amounts to 5% of my total income. You stop supplying me. I find another supplier, to replace your input.
But I have lost those 5% anyway.

Well, ask Medvedev. And it's probably true, with the current exchange rate. According to Finnish media, he just said all that like a few days ago.

The revised rate at how much? The current exchange rate sees a 25% hike last year. YOY it is about 45% hike (35vs USD to current 51). Which should if everything stays equal sink the Russian GDP value at about 1.2 trln USD. However as a part of Russian revenue is in hard currency (probably up to 0.6 trillion) this doesn't affect Russia as much.

May I have a source?

Kimppis wrote:

KoTeMoRe wrote:

Kimppis wrote:

KoTeMoRe wrote:

Kimppis wrote:So according to Medvedev, the sanctions are going to cost Russia $75 billion this year, which is "around 5% of the GDP". How is that even possible if the economy is going to decrease by 2-4% and even that is mostly due to oil price?

How is 75 billion 5% of Russian GDP? Is this revised rate and if so how does Medvedev knows how 2015 will end?

Because sanctions are offset to a certain amount and losses FROM sanctions are recouped with local production and diversification.

Little example.

I own shop. You are my main supplier. The trade with you amounts to 5% of my total income. You stop supplying me. I find another supplier, to replace your input.
But I have lost those 5% anyway.

Well, ask Medvedev. And it's probably true, with the current exchange rate. According to Finnish media, he just said all that like a few days ago.

The revised rate at how much? The current exchange rate sees a 25% hike last year. YOY it is about 45% hike (35vs USD to current 51). Which should if everything stays equal sink the Russian GDP value at about 1.2 trln USD. However as a part of Russian revenue is in hard currency (probably up to 0.6 trillion) this doesn't affect Russia as much.

May I have a source?

So yeah, it's saying basically the same thing as the article that was linked above. And according to Medvedev, 75 billion = 4.8% of the GDP.

government.ru wrote: However, it is only a fraction of the work done in the Crimean Federal District. I made a point of mentioning this because, apart from funding, Crimea will require our active cooperation in the very near future. This is why we all often go there – both our State Duma colleagues and my colleagues in the Government – not because Crimea has a good climate but because this territory is significantly behind our country. Significantly behind. Our goal is to make up for ground lost in the last 25 years, so that we don’t regret later the decisions that have been made. This is especially important, which is why I opened my presentation with it, despite the fact there was no question about Crimea in the questions that were put to me in writing.

The reunification of Crimea has influenced the economy. There is practically no economic sector that hasn’t been affected by some or other political measures, from the financial sphere and restrictions on access to foreign credit to technology imports. Losses caused by these restrictions are considerable, let’s not conceal them. As estimated by a number of experts, Russia has suffered damage worth about 25 billion euros, or 1.5 percent of the GDP. In 2015, this damage may increase several times over.

But, certainly, the economic consequences of the Crimean decision would have been easier if a number of internal problems had not piled up in the economy, problems that we had failed to solve. And this should be admitted frankly as well. All regions in this country have felt in full measure the repercussions of the deteriorating foreign economic situation and foreign policy upheavals. Budget revenues have sunk, while expenditures have, on the contrary, risen.

sepheronx wrote:I am also curious how it will cost Russia money when they cannot buy western goods? Can someone explain that to me? Was the import business worth $75B? Cause when you purchase your own made goods, you GAIN revenue. Logically, what your media ia claiming that medvedev said, sure does not sound right. $75B, does that also include debt repayment? If so, that doesnt count.

Kimppis wrote:Something doesn't add up, that's for sure. 2-4% (or whatever) decrease in GDP, mostly due to oil price vs. sanctions take "4.8% of GDP".

And last year Russian economy grew by 0.6%, if I'm not mistaken... And even that was mostly because of oil, right? It's not like Russian economy was going to grow 0.6% + 1.5% (Medvedev's figure) + whatever they lost due to oil (which should me way more than the sanctions!) in 2014 before the whole crisis.

Kimppis wrote:

sepheronx wrote:I am also curious how it will cost Russia money when they cannot buy western goods? Can someone explain that to me? Was the import business worth $75B? Cause when you purchase your own made goods, you GAIN revenue. Logically, what your media ia claiming that medvedev said, sure does not sound right. $75B, does that also include debt repayment? If so, that doesnt count.

Aaand... exactly. Why talk about GDP percentages? Doesn't make much sense.

KoTeMoRe wrote:The economy grew because of State intervention yes. And because the Oil prices were well above the 90 USD threshold up until November. Furthermore the USD started appreciating last winter which in return gave the Russian fund more value in regards to Euro. That probably was used by wealthy Russians to bet against RUB and EUR.

So basically indeed the Ru economy was going to do a lot better if everything would have stayed the same (oil over 115 USD and Euro at 1.25 vs USD). Because unlike you might think Russia has expanded its oil exports albeit the oil costs less.

Last year sanctions took 25 billion from the Russian economy. This year the effect could be high as 75 billion. This would be equivalent of 4.8% of the country's GDP, Medvedev said.

KoTeMoRe wrote:To see the original statement go to government.ru then look for "Government report on its performance in 2014".

You'll see that no good crisis goes to waste.

KoTeMoRe wrote:Go to government.ru, check for "Government report on its performance in 2014"

See by yourself.

Even a lowbob like me will not make definite predictions let alone the PM of a 150 million country.

government.ru wrote:These negative trends continued into this year. In January-March 2015, GDP declined by approximately two percent and industrial production by 0.4 percent from the first quarter of last year.

government.ru wrote:Oil production has stabilised at about 527 million [metric] tonnes, a slight growth on the previous period. This level is enough to meet our own needs and our exports.

Natural gas production is 640 billion cubic metres. There was a slight fall, but we reached an agreement to build a new gas pipeline to Turkey and Greece, as you know, instead of South Stream. A breakthrough 30-year contract was signed on gas supplies to China. A section of the pipeline to China along the Sila Sibiri [Siberian Might] eastern route is under construction.

Now, a few words about the transport sector. It was largely thanks to state support that air transport continued to grow, including, which is especially important, on domestic routes – something we have been working on in recent years and which we finally managed to restore. Excluding Moscow, domestic air transport was up 22 percent, with over 10 million passengers carried. A total of 93 million people used air transport, which is 110 percent on 2013. Let me remind you that under the priority measures for domestic air travel, we set a 10 percent VAT rate to support carriers and therefore support our passengers.

The situation in the commuter railway service was difficult. Under the priority action plan, a zero VAT rate was introduced for this sector. The situation has on the whole stabilised and is under control.