Thursday, March 5, 2015

5/3/15: Russian Economy: External Trade, Inflation and Wages

Quick digest of top news relating to Russian economy:

Customs receipts for Russian Federation in February 2015 reached RUB393.7 billion down 30% y/y. January-February receipts were RUB840 billion or 19.6% down y/y. Full year 2014, customs receipts amounted to RUB7.1 trillion - up 8.5% y/y.

Much of the decline is down to imports collapse: imports were down over 2014 by USD29 billion or 9.5% y/y to USD286 billion in 2014 from USD315 billion in 2013. Only three countries saw increased exports into Russia: U.S., Kazakhstan and Brazil. Largest declines in export to Russia were in Ukraine (31.9%), Japan (19.5%) and Belarus (15.6%). By category of imports: largest declines in Russian imports were in passenger vehicles (21.9%), heavy transport equipment and agricultural equipment and machinery (22.3%), engines and power trains (13.2%), household appliances (20%), milk and dairy products (17.5%), pharmaceuticals (13.1%), and alcoholic beverages (12.3%). Imports categories that posted y/y increases in 2014 were: computer equipment (8.6%), telecommunications equipment (6.9%), household chemicals (4.4%) and heating equipment (3.8%).

Given decline in external trade, largest adverse impact of the Russian crisis is being felt in Armenia and Ukraine.

  • Armenia received remittances from Russia to the tune of 10% of its GDP in 2012, which fell to around 6% by the end of 2014. Armenia's net exports into Russia accounted for roughly 3% of GDP, while Russian investors account for roughly 50% of total foreign investment stocks.
  • Ukraine received remittances from Russia amounting to 2.1% of GDP in 2012 and Russia accounted for roughly 25% of Ukrainian exports. Russian investors account for around 5% of the stocks of foreign direct investment in Ukraine.

Inflation: January inflation printed at 3.9% m/m, or 15% y/y. February 2015 inflation reached 16.7% y/y. Food prices rose 23.3% y/y in February, against 6.9% y/y inflation in food prices in February 2014. M/m February inflation was 2.2% m/m, suggesting potentially a slowdown in the rate of inflation. Some shorter term data suggest that over the first week of March, weekly CPI stood at 0.2% - the lowest weekly reading since October 2014. Good news, for many, bad news for many more: vodka prices fell 0.4% in February.

Wages: A recent survey by a large recruitment company, the Hay Group, showed that 75% of businesses are planning to raise wages in 2015. RBC has details (in Russian): E-commerce enterprises are planning largest wage hikes (+11.3% on average), followed by Industry sector (+10%), media (9.7%), chemical sector (+9.4%). None of the wage hikes planned are matching expected inflation: Central Bank of Russia forecasts 2015 year-end inflation at 12-12.4% and average inflation during 2015 at 15.8%.

An interesting report in RBC on the proposals for economic reforms from the Russian Union of Industrialists and Entrepreneurs (sort-of Russian IBEC), РСПП (see here: According to RSPP, Government response to the crisis should focus on achieving further liberalisation in the economy. First pillar of the proposals focuses on early stage reforms, especially those aiming to stabilise the financial situation in the corporate sector. Second pillar contains 73 specific Government and regulatory decisions that should be suspended to reduce their adverse impact on corporate sector.

Note: those who are interested to learn more about the above topics or the business and economic environment in Russia can contact me to arrange a more in-depth one-on-one briefing.

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