Russian Economy General News: #1

IMF Says Russian Economic Growth Model Exhausted

MOSCOW, October 9 (RIA Novosti) – The International Monetary Fund warned in a report published Wednesday that Russia’s economic model has exhausted itself and predicted that future growth will be constrained by negative demographic trends.

The IMF’s annual World Economic Outlook said that the Russian economy has managed to grow on the back of rising oil prices and by using up spare capacity, but that this formula will no longer work.

Growth prospects in Russia, the IMF said, “have been dampened by a weak external environment, some acceleration of capital outflows and declining equity prices and subdued investment.”

The IMF also warned that demographic changes are likely to cap future economic potential. Russia's dependent population is growing, and the working-age population is expected to shrink by one million people every year through 2017, according to the World Bank.

Problems that Russia could afford to ignore will now come to the fore, the IMF suggested. These include "inadequate physical infrastructure, including the transportation and electricity networks; overreliance on commodities; and a weak business climate,” the Fund said.

The government predicts that the Russian economy will grow 1.8 percent this year, the lowest rate since the 2009 financial crisis. Growth in Russia in 2012 fell to 3.4 percent from 4.3 percent a year earlier.

The IMF is more pessimistic in its growth forecasts than Moscow. It predicts in its report that growth in Russia will be 1.5 percent in 2013, down from the 2.5 percent forecast in July.

Kremlin critics say the government is unprepared to undertake the structural reforms that could increase investment and unlock higher economic growth rates.

Former Finance Minister Alexei Kudrin warned in an interview Wednesday that Russia is a hair's breadth away from recession.

"Negative growth is already a crisis," he told Novaya Gazeta newspaper. "If some sort of world platform provokes a deterioration in international competitiveness, it could lead to a negative growth rate."

President Vladimir Putin, whose government has been forced to make cuts to its 2014 budget because of the worsening economic situation, has promised huge state investment in infrastructure and urged an increase in productivity in an attempt to boost growth.

I call on IMF's bullshit. They so called predict China's fall but so far.....

On that too, population is growing and retirement isnt till what???

IMF is pissed because of the fact they are getting competition now with BRICS bank and now their dominance, especially in this field, governed in washington, is pretty much over.

Little they mention is transportation infrastructure in Russia is bigger than Canada, and they have not been reliant on resources for quite a few years.  Electrical grids are in more abundance too. Ease of doing business? Sounds familiar. Oh yeah, they wantmore western businesses to steal like they have in the past.

The best thing Russia and other brics countries done was the bank. Now Russia can concentrate on development in other fields and can seek further loans from brics bank, and give ease into economic investments from those countries rather than western. Only western countries that show good in Russia is Germany and France.

Investors from Asia-Pacific region fix their eyes on Russian Far East

DENPASAR (Bali, Indonesia), October 7 (Itar-Tass) - Investors from the Asia-Pacific region are showing great interest in investing in the Russian economy, especially in investments in the Far East.
“Investors from the Asia-Pacific region are showing pretty much interest in investments in Russia,” Kirill Dmitriyev, the head of the Russian Direct Investment Fund and co-chairman of the APEC (Asia-Pacific Economic Cooperation) Consultative Council, told journalists on Monday. He said that investors from China, Japan, Brunei and the United Arab Emirates were particularly active in Russia.
“On the whole, we can say that these countries have become exporters of capital. Therefore, we certainly need to work with them. They have investors who want to invest in our economy,” Dmitriyev explained.
He added that Indonesian investors were also interested in the Russian market. “There are money and growing companies in Indonesia that are interested in various projects, including in metallurgy and coal mining. There is every reason for us to work with them,’” the head of the Russian Direct Investment Fund emphasized.

Direct investment in Russian companies in January-September totaled $ 66 billion, an increase of 2.3 times!

Direct investment in Russian companies (excluding banking) in January-September totaled $ 66 billion, which is 2.3 times more than in January-September 2012 ($ 28.4 billion), according to the Bank of Russia .
Including in the III quarter of direct investment reached $ 15.3 billion, in II quarter - $ 15 billion, in I quarter - $ 35.8 billion
Investments of non-residents in Russian companies decreased in January-September to $ 6.6 billion of comparison, in the first three quarters of 2012 investments of non-residents fell by $ 6.1 billion for the entire 2012 - by $ 8.1 billion
Investments of non-residents in the commitment of government agencies (government bonds, government guarantees, and so on) have increased in January-September to $ 11.2 billion compared with $ 9.3 billion in the first three quarters of 2012
Not so much we are lagging behind the leading investment China. Since the beginning of the year the volume of investments there to $ 79.77 billion

Russian airlines have increased over 8 months of the carriage of passengers by 15% to nearly 57 million people

Russian airlines carried over 8 months of 2013 more than 56.6 million passengers. The growth was 15 percent compared to the same period in 2012. These statistics are published Rosaviaciya.
On international routes carried more than 30.7 million people / growth of 20% /, on the inside - almost 26 million / increase by 9% /, including about 1.1 million people transported to local airlines / increase by just over 1% /.

The extraction and production of gold in Russia for 6 months increased by 14.4%

The extraction and production of gold in Russia for six months in 2013 increased by 14.4% to 90.59 tons compared with the same period in 2012 due to the growth of production, associated and secondary production. Told Itar-Tass Russian Union of Gold chairman Sergei Kashuba citing preliminary data.
"If the price remains at the level of 1300-1400 dollars per ounce in one to two years, then slow down the increase of production and, at best, remain at current levels. This year, the company will focus on the volume of production to maintain revenues, and the following vskroyut year "stash" of ore with a high metal content, and everything will depend on how many companies have this rich ore "- said Kashuba.

In Russia, the number of housing has doubled in comparison with the Soviet period

Russia took the second place in Europe in terms of housing. In 2012, we built about 6 apartments per 1,000 inhabitants. For comparison, the average for the 27 largest European countries, half of that - about 3 flats per 1000 inhabitants.

By 2010, the average level of housing Russians was 23.4 meters per person. For comparison, Gorbachev was 16.4 meters. It is not surprising. Now housing is constructed as in the best years of the Soviet Union, in65-70 million square meters per year.

Instrument-making techno-park envisioned outside Moscow

A new techno-park to accommodate think-tanks and R&D companies developing new instrumentation will be built in the Ramenskoye district outside Moscow.

Specifically, the new facility will be tailored to help companies and organizations developing and manufacturing equipment for aircraft and spacecraft.

The techno-park is slated for completion five years from now and will require a hefty total investment of more than $900m. It is a joint project being pushed by three major Russian government-controlled entities also known as ‘national development institutions’—Russian Venture Company (RVC), Rostekhnologii (a huge technology development firm) and VEB Bank.

This is big news, as a technopark for specifics like this is what will drive science up significantly.

Russia should seriously look into not only technoparks and industrail parks, but even contemplating turning Siberia or Farther east into one giant techno/industrial Park. In doing so, investments will probably sky rocket as well as many many businesses will open (Small to large) as well as more money flowing. As well, maybe development where the areas are more or less dealt with by the local government rather than federal, and look into even privatization of authorities. But some big changes will have to happen first in the law structure before something like that could ever happen.

Putin seeks to double labor productivity to end ‘oil needle’ reliance

“The key bottleneck for the Russian economy is its low efficiency,” the President told businessmen, investors, and state officials at the Forum.

In terms of GDP, "we are poised to become Europe's number one economy and the fifth biggest in the world," Putin said, adding that Russia is on a par with other countries in the EU in terms of per capita GDP and consumption.

In 2012 Russia overtook Germany in the World Bank ranking to take 5th place on the list of the world’s biggest economies in terms of purchasing power parity (PPS)

However, labor productivity is now less than half the level of most developed economies – at 3.1 percent. In coming years, productivity must increase by 5%-6% a year, twice the current rate. "Only in this way can we overcome the efficiency gap," the president said. "I am confident that we are capable of doing that," he concluded.

The current abyss between consumption and productivity is dangerous, Putin said. “Living off rent from natural resources, at the expense of future generations, unearned wealth cannot be stable or long term," he added.

sepheronx wrote:I call on IMF's bullshit. They so called predict China's fall but so far.....

On that too, population is growing and retirement isnt till what???

IMF is pissed because of the fact they are getting competition now with BRICS bank and now their dominance, especially in this field, governed in washington, is pretty much over.

Little they mention is transportation infrastructure in Russia is bigger than Canada, and they have not been reliant on resources for quite a few years.  Electrical grids are in more abundance too. Ease of doing business? Sounds familiar. Oh yeah, they wantmore western businesses to steal like they have in the past.

The best thing Russia and other brics countries done was the bank. Now Russia can concentrate on development in other fields and can seek further loans from brics bank, and give ease into economic investments from those countries rather than western. Only western countries that show good in Russia is Germany and France.

I think its fair to say that the IMF is utterly full of shit. Its the focal pt of the so called "Washington Consensus". Which, behind all the spin is the idea that some American based globalists should be at the top of a corrupt pyramid. The American rich are the next step down, then everyone below is a mere pawn.

What does the IMF want in any country it ventures into? Well its obsessed with nonsensical misuse of GDP figures. You can inflate GDP by debt, non-wealth creating transaction costs, fiddling inflation figures, and also raising taxes. Its a long story but I'll leave it at that for now.

What else does the IMF want, say in Russia? Well ofcourse it would love it friends to get their dirty mitts on Russia's oil resources at knock down costs, and Russia's media. Also turn Russia into a giant GM food factory, pollution the country for millenia, causing untold cancers and other diseases.
They plan to financialize nature just like they financialised energy and other basic life needs like food, water etc.

Ofcourse it would love to access Russia's tech and military base, siphon it off an use it for its own ends.

They want a constant stream of titbits to buy, slash worker costs, then spin off somewhere. All built on other people's money.

One way to get these sham growth figures is by a constant stream of immigrants. The west wants a mass of immigrants, and less indigeneous people(who expect a better standard of living). This is why Europe and America are seeing huge growth in proportion of immigrants, whilst the indigeneous arent even having kids. The bizarre policies of the IMF etc are nothing but a disease in their own countries, let alone the countries they'd even more willingly rip apart.

Generally it will bribe and con politicians into saturating a country with debt. Then it will default and suck up as many state assets as it can - see Greece.

I know politicians and economists. Its no different to the damned fashion industry. They talk about trends and use their buzzwords. Anything they dont like, they'll try and smear as "outmoded"/"stagnant" etc etc. The problem is, these economists are all employed to earn bonuses or make their companies profits. They regularly destroy governments who dont acquiese, but they regularly have no idea how to assist a nation state. Medvedev seems a little vulnerable to this disease. Gorbachev and Yeltsin were its full blown bitch. I believe Putin knows better.

Taking stock

What is the growth strategy for Russian economy? Do the government and the Central Bank have a sound plan in place? Are sudden changes in economic policy a sign of panic of improved judgement?To discuss the state of Russian economy and government strategy Peter Lavelle is joined by Chris Weafer and Yaroslav Lissovolik.

http://rt.com/shows/money/russia-economy-policy-strategy-475/

Peter Voser: cheap shale gas is a myth

Shale gas will not change energy pricing structures across the world, according to the chief executive of Shell

It is a "myth" that exports of cheap shale gas from America will cut gas prices in Europe and Asia, Peter Voser, chief executive of Royal Dutch Shell has warned.

America is sitting on a glut of shale gas that has seen prices plummet to as little as a third of UK prices. It is now in the process of developing export terminals where the gas will be cooled for shipping abroad as liquefied natural gas (LNG).

UK politicians have hailed the prospect of Britain importing cheap gas from the US as one solution to help consumers struggling with rising energy bills as domestic gas production dwindles.

But Mr Voser said that the idea of "cheap US gas going into the rest of the world and therefore changing the pricing structures across the world" was a "myth".

The price impact of US exports would be "not that significant" because the additional costs of liquefying, transporting and then re-gasifying the gas would mean its eventual cost was comparable to existing market prices, he said.

Earlier this year British Gas owner Centrica struck a £10bn deal to export LNG from the US, welcomed by David Cameron, the Prime Minister, who claimed that "future gas supplies from the US" would help provide British consumers with a new "affordable" source of fuel.

Former energy secretary Chris Huhne last month urged the UK government to pressure the US to allow more exports, which he claimed would "gradually equalise the gas price in the US with the rest of the world" and help reduce UK prices.

US benchmark gas prices are currently about $3 to $4 per million British thermal units, having dipped below $2 last year.

But Mr Voser said that while US gas might cost between $4 and $6 – Shell's assumption of longer-term prices – it would arrive in Europe at a cost of $8 to $10, comparable with European prices that have averaged between $6 and $11. Shell has repeatedly played down the prospects for shale gas development in Europe and the UK.

It has shunned involvement in the embryonic UK shale industry – which the Prime Minister has also suggested will cut energy bills.

It is involved in shale gas exploration in other areas like China but Mr Voser said that Chinese shale gas would be consumed by the country's domestic gas market and would not "alter the pricing mix and the volume in Asia-Pacific".

Mr Voser was speaking to The Daily Telegraph in Geoje, South Korea, where the company is building a huge floating LNG plant.

He is due to retire from Shell at the end of March 2014 after 29 years with the company, and will be replaced by downstream director Ben van Beurden.

Russia to invest $1 trillion in energy projects, almost half more than Canada

Russia's investments in energy projects in the next ten years will exceed Canada's funds by almost 50% to amount one trillion dollars, president of the Global Energy non-commercial partnership Igor Lobovsky said at the 22nd World Energy Congress in the South Korean city of Daegu.

"For the next ten years investments in energy projects announced by Russian Energy Minister Alexander Novak will be almost half more that capital investments of Canada, which intends to invest $650 billion during the same period," he said.

Energy consumption of Asia-Pacific countries grows every year, Lobovsky noted. Annual consumption of China alone grows 5.8% with its annual economy growth of 10%.

Russia, as the world's major gas exporter and one of the largest oil suppliers, successfully implements new promising projects with Asian partners, Lobovsky said.

The Global Energy international prize is awarded annually since 2003 for outstanding scientific achievements that bring benefits for all mankind. The idea to establish the prize was proposed by a group of known Russian scientists, supported by major energy companies and approved by the Russian president. The founder is the non-commercial partnership for development of international research and energy projects. An international committee consisting of scholars and experts from various countries and representatives of international scientific organizations decides whom to award. A laureate may be any citizen of any state. The Global Energy Prize fund amounts to 33 million rubles.

Instead of just throwing money at it, they should seek more investors to guarantee contracts. Or, maybe the other aim is to pump so much, to reduce overall costs, and lower prices and transport more while it becomes cheaper to extract and process. Other than that, seems to be kind of a waste if it is barely used.

Infographics ITAR-TASS. Diagrams illustrating the basic parameters of the budget of Russia for 2013-2016.,

New Lada Kalina coming out soon. Will be interesting how it sells.

sepheronx wrote:Instead of just throwing money at it, they should seek more investors to guarantee contracts. Or, maybe the other aim is to pump so much, to reduce overall costs, and lower prices and transport more while it becomes cheaper to extract and process. Other than that, seems to be kind of a waste if it is barely used.

Most of the $ 1 trillion will come from Private Sectors or Companies in Energy Business eg Gazprom , Rosneft and many other private players Exonmobil , BP etc

The Government funding will not be much may be 1/3 of that amount.

well they are counting on prices of oil( 7%)and especially gas (14%) going down in the future...
hm but if they stay on level as today ,the buget actually maybe evenly balanced...
also some projects started today od some years ago need some time to yield returns .
so i dont think there will be actual deficits. the projections look a tad bit pessimistic , just to be on the safe side.

If Oil & Gas price stay put or go high then money goes to Reserve Fund , National Welfare Fund and Forex in some percentage.

The budget will remain in deficit as they have decided to use fix % of Oil Wealth and balance the budget.

Austin wrote:

sepheronx wrote:Instead of just throwing money at it, they should seek more investors to guarantee contracts. Or, maybe the other aim is to pump so much, to reduce overall costs, and lower prices and transport more while it becomes cheaper to extract and process. Other than that, seems to be kind of a waste if it is barely used.

Most of the $ 1 trillion will come from Private Sectors or Companies in Energy Business eg Gazprom , Rosneft and many other private players Exonmobil , BP etc

The Government funding will not be much may be 1/3 of that amount.

Thanks for the info.

TR1 wrote:New Lada Kalina coming out soon. Will be interesting how it sells.

Best thing to happen to Avtovaz is new management as the Granta has shown quality and value in the same package. Best selling Lada vehicle in a long time. Hope to see new Kalina.

After a long time I found some useful graph that you can track real time to find prices of Ural Blend Oil that Russian Exports

Check this link http://www.nesteoil.com/default.asp?path=1,41,538,2035,5193

Brent is selected by default unselect it and choose Ural and you can find Ural Oil Price for Today or for 5 days or for a year or 5 year ....you can track its movement ....on the top size of Graph you will find Zoom and you can track those time span.

Ofcourse you can select both Brent and Ural and track the difference and how it moves.

Austin wrote:If Oil & Gas price stay put or go high then money goes to Reserve Fund , National Welfare Fund and Forex in some percentage.

The budget will remain in deficit as they have decided to use fix % of Oil Wealth and balance the budget.

thanks for clarification ,so reserve fund will absorb any surplus ,and a good link there diff is not much few percentages. Brent is pumped less and less with worse quality.,
Partnership wiht renault -nissan, france-japan group sure improved Lada production. Renault owns romanian Dacia automaker. Those models look like dacias models logan sandero Lodgy(mini van) .

Shuvalov: Innovative Development of the Russian Federation will not be until the cheaper oil
http://ria.ru/economy/20131020/971362348.html

"The main demand for innovation is when there is no hope of higher prices for our traditional exports. If this continues for a long time, we will have serious problems with the innovation development" - Shuvalov said during the discussion of the Russian session the Davos World Economic Forum.

Shuvalov said that taking part in many international forums, he often has to answer questions about what the Russian government will do in the event of a sharp decline in earnings from the export of oil and gas. First Deputy Prime Minister acknowledged that such a development is possible and it will create difficulties for the authorities, who have significant social obligations.

"But what is good - what if the price of oil and our main export groups still go down, then opens a completely different option for those who do not have any relation to the commodity sector," - said Shuvalov.

He recalled that during the 2008 crisis, it came to entrepreneurs working in non-oil sectors of innovation, and were happy that there was a crisis that forced the government to pay attention to these areas.

"How fast it went - once returned energy prices," - said the first deputy prime minister.

Russian Budget to Lack $94Bln in Next 3 Years - Ex-Minister

http://en.ria.ru/business/20131021/184264094/Russian-Budget-to-Lack-94Bln-in-Next-3-Years---Ex-Minister.html

MOSCOW, October 21 (RIA Novosti) - Russia’s ex-Finance Minister Alexei Kudrin said the country’s budget income is likely to be short of three trillion rubles ($94 billion) in the next three years due to the slowdown in the economy’s growth.

“The risk zone is over three trillion rubles taking three years [2014-2016] on the aggregate,” Kudrin, who attended the World Economic Forum in Moscow on Sunday, said.

The former finance minister also said that this year’s economic growth will be below the earlier forecasted 1.8 percent and will stand at 1.6 percent.

“Our growth potential for 2014 is around 2 percent, but may be even lower,” Kudrin said adding that in the next five years the annual economy’s growth will not be exceeding the mark of three percent.

The government draft budget for 2014-2016, which is pending review in the State Duma, was criticized last week by the Audit Chamber for its forecast of annual economic growth of 3.3 percent.

The watchdog said the forecast ignores risks to fixed investment into the Russian economy. It also says revenue from oil and gas, value-added and corporate taxes, privatization of state enterprises and domestic borrowing may all be lower than expected in the draft.

Surprised Kurdin is even talked about anymore. That guy did squat for Russias development.and economy and he was let go, so he pretty sore about it. Its best to ignore his "professional" understandings.

He is starting to ramble on a bit with the same old, same old.

I actually had the same thoughts creeping in as you just earlier today but I swatted them away with the power of my mental fly-swatter.
Kudrin did a lot for Russia; he is responsible for its financial stability all throughout the last decade; while presiding over a period of fast growth. The Russian financial situation improved greatly under his leadership; Paris club debt was paid off early, as well as Russia's other outstanding international debt, gold and foreign currency reserves shot up to a high of 3rd in the world behind Japan and China, several funds were formed for the oil & gas proceeds; which turned out to be a very wise strategic decision; the fund right now funding Russia's military revival and purchases, and also slated to be used for infrastructure investments - is the very same one that was founded under Kudrin's leadership last decade.
The only real failure was that the inflation was never curbed to the extent desired; however it was still kept under control all things considered.

Now of course Kudrin is out of power - yet the economical growth is slowing; inflation has lowered but is still not where it should be considering the smaller economic growth rates, debt is rising and the funds are being depleted bit by bit.

The entirty of the worlds economy is slow(ing). Brazil and India are really low right now as well, Europe in a bad spot too. Great thing about the world trade organization, Russia is now too tied to the others as well is forced for specific changes that really just works in favour of others.

Kurdin did do good by paying off debt, but under him, there wasn't real investments till now, since his ousting. Yeah, gdp growth has slown down thanks to austerity. But what else to do? Investments are higher than ever, same with development. Kurdin loves to talk but one thing I find common though, is that it is complaints and no solutions. So what are the solutions? Divetsifying economy? But that is happening. So whats next? Fighting corruption? Trying, but hard to when majority of others are corrupt (social issue). Getting people to actually pay their taxes? Well, I would hope they are fighting those who are not through black bookings.

During Kurdin era, the world bitched about Russia's lack of economic development past oil/gas. Because the fact that Russia's growth has slowed down thanks to lower purchases from Europe as well as growing debt from internal enterprises, I really do not see how Kurdins process of stashing wealth under the mattress will fix this issue.

Im no economist major, but even I can throw some ideas out there:
- Build up domestic consumption by concentrating on the middle class, by aiding them to become middle class.
- Flat tax rate for businesses. Makes it easier for small/medium businesses in terms of financing, and brings in still lots from major companies.
- make many state run companies public owned. Or the smaller state run companies (which are not vital) to be privatized.
- Get the companies that build specifics to look at expanding in the market. Sokol did this by making silverware during bad times. Kept people working and money coming in.
- Expand investments into the areas that really need it as well invest more in other countries for investments (energy).

See, im not even one of these officials, but at least I am being more proactive than most of these economists.