URALSIB Capital held a round table with Western mass-media to discuss the Russian investment market
On 11 April, 2011 URALSIB Capital held a round table in London to discuss the Russian investment market.
Participating on behalf of URALSIB Capital were Chief Economist Alexei Deviatov, Chief Strategist Chris Weafer, and Deputy Head of Research Vyacheslav Smolyaninov.
The participants gave their assessment on the state of the Russian economy and the investor attractiveness of its core sectors. By and large, the experts are in agreement that this year’s moderate growth rate will remain in place for the next 2-3 years. At the same time, the speakers highlighted some issues of concern relating to the institutional challenges that face Russia and the lack of progress in incentivizing long-term investment opportunities. That said, there is some optimism that a strategy put forward by President Dmitry Medvedev aimed at improving the investment climate in the country will bear fruit. If successfully implemented, we could see substantial volume of FDI flowing into the Russian economy.
The manufacturing sector is seen by the experts as the main driver of Russia’s economic growth. It has already regained the pre-recession levels of capacity utilization. However, in the absence of large-scale investment it would only be natural to expect a slow down in its growth rates. Another contributing factor to the slow-down is ruble strengthening in real terms, which has been observed since the second half of 2009. “On top of that, we do not exclude that inflation in Russia could reach double-digit growth rates by this summer, noted Alexei Devyatov. On this backdrop of a strengthening ruble and imports outpacing exports: these factors combined could lead to a current account deficit by the end of 2012 “.
Analysts are rather skeptical about the future of the Russian economy. According to Chris Weafer, there are still a number of systemic issues that the government needs to resolve in order to upturn the situation. Specifically, a major hindrance to Russian economic development is the high levels of corruption and bureaucracy, as well as the high dependency the economy has on prices for natural resources. Effective measures are also needed to improve the regulatory framework and demographic situation and to form a strong middle class – the backbone of economic system in any country. As Vyacheslav Smolyaninov pointed out, a pivotal task is to increase the attractiveness of Russia in the eyes of the investors through representation of a broad industry range in the stock market and through formation of long-term investor base.
April 21, 2011
