Friday, December 5, 2014

5/12/2014: ECR on Russian Economy

Euromoney Country Risk on Russian economy under oil shock:

"Large oil producers, such as Russia, with undiversified economies and where political and other problematic factors prevail, are already seeing heightened risk that reflects their vulnerability.
Russia is facing a perfect storm of sanctions, falling oil prices and a currency in freefall since it was floated by the central bank to avoid further foreign-reserves depletion.
Its score has fallen sharply, taking the sovereign down 17 places and into the fourth of ECR’s five tiered categories equivalent to a B- to BB+ credit rating.
Russia has ample reserves, exceeding $400 billion, and the budget balance is cushioned somewhat from lower oil prices by the countervailing effect of the rouble’s slide.
Yet it seems inevitable now, with investment down, that Russia’s economy will contract in 2015.
Household disposable incomes will fall sharply as inflation and unemployment escalate, weighing on consumer spending. Rising dollar interest costs exacerbating debt rollover risks will burden the banks already managing depositor withdrawals."

A handy chart:

1 comment:

The dork of cork said...

Cash flow metrics would be interesting to see in Russia.

Looks to my dorkish eyes to be a attempt to introduce a national capitalist monopoly in Russia using the mechanism of devaluation.

A sort of Fordist Lava Granta economy.
Given the lack of material input constraint given the low population density and surplus oil this is a viable option.