17/1/17: Russian Economic Policy Uncertainty 2016

In the previous post (link here), I covered 2016 full year spike in economic policy uncertainty in Europe on foot of amplification of systemic risks. Here is the analysis of Russian index.

As shown in the chart above, 2016 continued the trend for downward correction in Russian economic policy uncertainty that took the index from its all-time high in 2014 (at 180.4) to 160 in 2015 and 142.5 in 2016. All data is rebased to 1994 - the first year for which Russian data is available. However, at 142.5, the index is still well above its historical average of 94.1 and stands at the fifth highest reading in history.

Much of the reduction in economic policy uncertainty over 2016 came over the fist seven months of the year, with index readings rising into the second half of 2016 and peaking at 251.1 in December.

In simple terms, while the peak of 2014 crisis has now passed, questions about economic policies in Russia remain, in line with concerns about the sustainability of the nascent economic recovery. Moderation in economic policy uncertainty over the course of 2016 appears to be closely aligned with:

1. Variations in oil prices outlook; and
2. External geopolitical shocks (including the election of Donald Trump, with raw index data spiking in August and September 2016 and November and December 2016, while falling in October, in line with Mr. Trump's electoral prospect).

In other words, relative moderation in the index appears to reflect mostly exogenous factors, rather than internal structural reforms or policies changes.

4/9/16: Some Points on Russian & European Policy Uncertainty Trends

With some positive (albeit very weak still) changes in the Russian macroeconomic news in recent months, it is worth looking at the evolution of trends in Russian policy uncertainty, as measured by the http://www.policyuncertainty.com/ data.

Here is an updated (through August 2016) chart comparing news-based indices of policy uncertainty in Russia and the EU

Note, series above are rebased to the same starting point for the EU and Russia (to 1994 annual average) to make them compatible.

Things of note:

• Russian policy uncertainty continues to trend below that of the EU
• The above conclusion is also confirmed in raw data 3mo averages and 3mo exponential moving averages
• This is nothing new, as general policy uncertainty has been systemically lower in Russia than in Europe since the peak of the Russian Default crisis of the late 1990s, with exception for two episodes: brief period in 2006-2007 - the starting point of Russian-Georgian trade and migration pressures; and 2014-2015 period - marked by first economic slowdown in the early 2014, followed by the Russian-Ukrainian conflict and the Ruble crisis
• Generally, the EU continues to show growing trend divergence with Russia when it comes to policy uncertainty, despite the more moderation in the underlying series since the end of the latest spike caused by the Greek crisis earlier this year (IMF participation and Tranche 2 disbursement)

It is worth noting that, despite a rise in the U.S. uncertainty index due to the ongoing election cycle, the U.S. comparatives are similar to those of Russia, as opposed to the EU.