INTERVIEW: ACRA: Russia’s economy to avoid shock fall in 2016

MOSCOW, Jan 22 (PRIME) -- The Russian economy will stagnate at its best, but will avoid a sharp fall in 2016, Analytical Credit Ratings Agency (ACRA) CEO Yekaterina Trofimova said in an interview to PRIME on Friday.

“The Russian economy will stagnate at its best in 2016. It is connected with falling incomes of households and consumer demand, economic growth rates of its partners, a fiscal disincentive, persitent external restrictions and other negative factors,” she said.

But a sharp fall is unlikely in 2016, Trofimova said. “And this is good news. Dynamics of real GDP (Gross Domestic Product) may vary from minus 2.9% to plus 0.4% as an average annual oil price varies from U.S. $30 to $55 per barrel,” she said.

The Economic Development Ministry expects GDP to fall 0.8% at an average annual oil price of $40 per barrel of Brent or to rise 0.7% with oil at $50 per barrel in 2016.

The central bank believes that the Russian economy will continue falling, but the slump is likely to slow down to 0.5-1%. The regulator expects GDP to swing to growth no earlier than in 2017.

BANKS UNDER CONTROL

Trofimova said that the situation in the Russian banking sector is under control, and authorities’ timely regulation and expansionary measures allowed banks to avoid a systemic crisis.

The measures included a state program for boosting capital, she said. The government allowed banks to receive over 800 billion rubles through OFZ federal bonds to boost their capitals; the bulk of the sum was provided to systemically important banks.

At present, it is not volatility on financial markets but the credit risk, which poses a threat to the banking system, the official said, adding that the situation in the producing economy is changing gradually and the central bank and banks have a chance to minimize the harmful influence by increasing efficiency of bad debt management and controlling risk appetite.

Top Russian lender Sberbank CEO German Gref said in 2015 that the banking system faces a crisis and bankers’ total losses for 2014–2015 exceeded 3% of GDP, which indicates a crisis under IMF norms. In 2015, Russian banks lost about 1.5 trillion rubles against 900 billion rubles in 2014.

KEY RISKS TO COMPANIES

Key risks for the Russian companies include falling domestic investment and consumer demand, inflation which slows down not as fast as it was expected, and the high cost of borrowings, Trofimova said.

Debt-dependent industries, including trade and construction, will face greatest difficulties this year, according to the official.

Past-due debts to banks in such branches as air transport and construction rose the fastest in 2015. In January–September 2015, outstanding debts of air carriers rose 12%, and overdue debts of construction firms increased 7%.

A Finance Ministry plan of public borrowings is unlikely to influence the debt market significantly, she also said.

(83.5913 rubles – U.S. $1)

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