Prospects of the Russian Economy and Finances and their Role in the Global Economy

Перспективы российской экономики и финансовой системы и их роль в глобальной

экономике

Triangle Club InternationalMoscow, November 20, 2012

Arnaud Leclercq

Partner, Lombard Odier Capital Partners

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Prospects of the Russian Economy and Finances and their Role in the Global Economy

Перспективы российской экономики и финансовой системы и их роль в глобальной

экономике

Triangle Club InternationalMoscow, November 20, 2012

Arnaud Leclercq

Partner, Lombard Odier Capital Partners

Russian economy is now recovering from 2008-2009

Growth Growth was above 4.5% last two years and should be above 3.8% this year

Budget Last 12 years: mushrooming expenditures fuelled by 388% increase of oil prices between 2000 & 2008.

By 2015, Russia might face a current account deficit

Employment Unemployment went down to 5.2% in August 2012, which is historically low.

Increase of social expenditures had positive results.

Inflation & competitiveness Increase of social expenditures did not create inflation. In fact, it’s decreasing since 2008 and stabilised at 6.5%.

International trade During the first months of 2012, the trade surplus declined In 2013 & 2014, Russia will face the economic slowdown of its main economic partners.

Financial sector From June 2011 until June 2012, MinFin and CB have in fact financed 40% of the volume of credit increase.

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Quick overlook on major economic aspects:

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Three aspects are creating some uncertainty for the near future:

Russia’s budget is still extremely vulnerable to oil price swings

General economic slowdown in the world.

Impact of shale gas resource

Source: U.S. Energy Information Administration, Annual Energy Outlook 2012

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Investment climate should be improved

There should be positive & important signs for investors

Russia starts to lean a bit more East

Russian business should talk directly to EM

Economy is growing 3.8% - Capital outflows are still high

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RUSSIA & THE EURO CRISIS

Russian authorities have contrarian views: Support the construction of the EU (MID) Criticism of the Eurozone (Kremlin)

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October 25 President V. Putin at the Valdai Club:

“EU is not a true Federalism and has all inconvenient without the advantages”

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The cost of keeping the Euro vs the cost of exiting

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Russia, a Eurasian alternative centre of economic power

In its History, Russian has never been as strong as when it accepted to look East

Its relations with the West were an accumulation of wars, misunderstandings, humiliations

The true disconnection between the West and Russia is recent

Conversely, every time Russia based its equilibrium and strength on Asia and Eurasia, it succeeded in a much easier way

Recent partnerships with the East are doing well and remain promising

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Recent partnerships with the East remain promising

New pipelines to Japan and Korea New silk road Arctic oil & gas reserves Good relationships with Central Asia States and India Diplomatic warmth with Japan All frontiers issues with China now solved

By all means, Russia has to assume its Eurasian identity

Developing countries start to cooperate directly between one another

Russia can be more than a facilitator between the West and the East

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