UPDATE: Russian companies’ debt burden on brink of safety – cbanker

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MOSCOW, Apr 19 (PRIME) – Russian companies’ debt burden is on the brink of being safe for emerging economies, First Deputy Central Bank Chairwoman Ksenia Yudayeva said at a conference on Tuesday.

“Debt financing is the main form of financing of companies in our country, we are already above an average debt burden, or I would say at the breaking point of the level, which is considered safe for emerging markets,” she said.

“But you have to understand that not only in our country, but anywhere in the world debt financing is not the key source of financing investment. Investment is mainly financed from profit. Companies also raise shareholder equity for investment and here we are lagging behind other emerging economies a lot.”

Prices may rise as much in 2016 as in 2013, when it amounted to 6.5%, if there are no new shocks, but it is not enough for the economy to grow as inflation is too volatile for long money to appear, Yudayeva said.

“I would like to point out that the current growth of prices since the beginning of the year has been close to the one we had in 2013. If there are no new shocks, the price growth by the end of the year will be comparable to 2013,” she said.

“But it is not enough from the point of increasing dynamics and quality of possible economic increase. Because the level of inflation is too high and inflation’s dynamics is still too volatile for long money to form in the economy,” she said.

Central bank forecast for 2016 envisages inflation of 5.5–6.5% under an average annual oil price of $50 and inflation of 7% if the oil price is at $35.

She also said that Russia’s inability to balance the budget may increase volatility and new shocks at financial markets. Russia should seriously optimize its budget, otherwise it would repeat mistakes of other BRICS states, where budget situation led to high currency volatility.

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