15/12/2014: Don't Blink... or Russian Data Will Get You!

It seems you blink these days and Russian ruble slides: down 10%+ today alone against the USD and down massive 48.13% for the year so far:

Credit: @RobinWigg

Blink again: the Central Bank revises estimates for capital outflows: new estimates suggest Q4 outflows have accelerated again to the levels of Q1 2014, implying full year outflows of USD133.8 billion, basically on par with the disastrous 2008.

Credit: @Schuldensuehner 

You sneeze and... boom... new estimates for growth are coming out: down to -4.5% for 2015 or even 4.7% assuming oil prices staying at 'current' levels of USD60 per barrel (annual average).

Reach out for a cup of tea and as oil price plummets, so does the ruble. If we take RUB3500/barrel or RUB3720/ barrel estimates built into two revisions of the Budget, you have USD/RUB rate in 88-93 range.

Put kids to bed and 10.5% Central Bank rate goes up to 17% - on foot of an emergency: http://www.bloomberg.com/news/2014-12-15/russia-increases-key-interest-rate-to-17-to-stem-ruble-decline.html

Take a smoke break and Russian CDS are busting past the 30% CPD ceiling: http://trueeconomics.blogspot.ie/2014/12/15122014-russia-ukraine-cds-hitting.html

Analysts' nightmare, comedians' rich picking. And comedians are out, in force, pretending to be analysts - the host of geopolitical journalists are now all spotting 'economic analysis' on their webpages. It is going to get worse - Politburo 'Hats Readers' are now coming out with economics and finance analysis, so expect a massive crash...

In truth, as noted earlier (http://trueeconomics.blogspot.ie/2014/12/11122014-central-bank-of-russia-good.html) 100bps hike in CBR rate earlier this month was useless. Useless across the board. Tonight's hike to 17% is clearly a serious push for an attempt to stabilise the ruble and stem the capital outflows. But it won't do the trick either. Much of outflows is driven by bond redemptions. So is much of the demand for dollars. And in this scenario, all the interest rates are going to achieve is collapse investment.

In brief, we are now headed into the inevitable:

• Step 1: capital controls with limited exemptions for individual sectors and firms; and
• Step 2: debt redemptions break for companies directly impacted by the sanctions.
• Step 3 (or maybe it will be step 1 or 2): revise growth estimates for 2015 to -7%, because there won't be any domestic investment at 17% rates and there won't be any foreign investment at 49% devaluation rate, and there will be no government investment at capital outflows into USD130 billion and bond redemptions mounting (http://trueeconomics.blogspot.ie/2014/11/24112014-external-debt-maturity-profile.html). There won't be much of consumption as RUB heads toward RUB/EUR100 marker and banks are not lending.

Speed up your blinking, folks, and buckle your seat belts.

29/8/2014: Some Unpleasant Forecast Revisions for Russian Economy

Russian Economy Ministry updated its 2014-2015 economic forecasts. 2014 forecast for real GDP growth remains at 0.5%, a notch below 0.6% forecast by the Central Bank. The ministry lowered forecast for 2015 to 1%, from 2% previously.

Notably, the Ministry did not raise its GDP growth forecast for 2014, despite numerous recent comments by Ministry officials that they expect 2014 GDP to come in at closer to 1% growth.

Updated inflation forecast is for 7-7.5% y/y in 2014. This reflects an uplift of 1-1.5% on previous forecast (6%) and is 1.5-2% above the official CBR target. CBR own forecast is for 6% for 2014. Revisions in inflation forecast are down to impact of imports bans on food which is expected to add 1% to the inflation rate in 2014 and 0.5% in 2015. Furthermore, sales tax introduction in 2015 (on top of 18% VAT already in place) will add another 1% to inflation. Ministry 2015 forecast for inflation is now at 6-7% which is an increase of 1-2% on 6% forecast issued previously. CBR target for 2015 was 4.5%.

You can read more about GDP growth conditions, inflationary pressure and the impact of the imports ban in food sector here: http://trueeconomics.blogspot.ie/2014/08/2882014-state-of-russian-economy.html

Analysts consensus forecast is for 0.3% GDP growth and inflation of 6.5% in 2014. The latest forecasts from the Ministry suggest that there will be serious revisions to the Budget for 2015.

Growth in retail sales for 2015 is forecast to fall to 0.5% (latest growth of around 1%), while fixed investments is forecast to increase by 1.5% (current rate is -2%). Ministry projects a nearly 8% drop in Russia’s imports this year, in line with 'normal' Russian economy's reaction to a growth slowdown and in a clear response in capital imports demand to higher CBR rates. Investment is forecast to return to growth of less than 1% in 2015. 

9/1/2014: Danske EM: Russian Economic Outlook 2014

Danske Emerging Markets out with their outlook for Russian economy for 2014. Here are two core snapshots with my brief comments (click on the image to enlarge):

All good. Concern is that credit growth (consumer credit) is still high, although from relatively low levels. On optimism for 2014 side, there might be a rebound. Certainly the projections for oil and energy prices and basic commodites are better and improving. But 'Sochi Effect' is questionable. See here on the timings of the economic impact of the London Olympics: http://trueeconomics.blogspot.ie/2012/10/18102012-some-tough-love-from-stats-for.html and here's something on the Olympics Effect in the longer run (aka no effect): http://trueeconomics.blogspot.ie/2012/08/282012-bit-of-olympic-bubble.html

And a spot-on bit on monetary policy:

One bit - I do not think there will be a dramatic fall-off in inflation.

Here are two core charts: