the dawn of a new economic era? russia economic report april 2015 | edition no. 33
TRANSCRIPT
The Dawn of a New Economic Era?
Russia Economic Report April 2015 | Edition No. 33
• A steep drop in oil prices, geopolitical tensions with sanctions shocked an economy already impacted by lingering structural problems.
• The economy was successfully stabilized. The shocks hit the economy late in the year. Growth was 0.6 percent.
• Weaker Ruble and trade restrictions revived manufacturing activity.
Russia’s economy experienced two
shocks in 2014, but avoided a recession
Growth prospects for 2015-2016 are
negative
• The full effects of the two shocks will become evident in 2015 and likely push the Russian economy into recession.
• The World Bank baseline scenario projects a contraction of 3.8 percent in 2015 and a contraction of 0.3 percent in 2016.
• Two alternative scenarios with a lower- and upper-bound oil price.
The impact of sanctions is likely to
linger for a long time
• The World Bank baseline outlook sees the poverty rate increasing from 10.8 percent in 2013 to 14.2 percent in 2015 and in 2016.
• This would be the first significant increase since the 1998-1999 crisis due to declining income and consumption and high inflation.
1
2
Achievements in shared prosperity are
under threat
• New realities will have the potential to alter the structure of the economy and the ways Russia integrates with the rest of the world.
• Strategic policies needed to balance old and new risks to the economy: (1) manage adjustment to the lower oil price and sanctions; (2) lessen structural growth constraints.
4
Main messages
3
Russia Economic Report No. 331. Recent Economic
Developments
2. Outlook and Risks
3. The Economic Impact of Sanctions
Recent Economic Developments:A Year of Economic Turmoil
The Tale of Two Shocks: Oil Prices and Impact of Economic Sanctions
Oil Prices and Ruble Exchange Rate in 201430
35
40
45
50
55
60
65
7040
50
60
70
80
90
100
110
120
Oil price Rub/USD (right hand axis)
→ High Inflation and Declining Real Wages Dampen Consumption
Russia’s CPI inflation by components and Real wage growth, percent, y-o-y
0
2
4
6
8
10
12
14
16
18
2011 2012 2013 2014 2015
Food Non-Food Services CPI
-10
-5
0
5
10
15
2009 2010 2011 2012 2013 2014
Nonmarket NontradablesTradables Total
Russia’s Economy Avoided A RecessionGrowth composition, percent, y-o-y
-15
-5
5
15
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Consumption Gross Fixed Capital FormationChange in inventories ExportImport Stat errorGDP growth
→ Monetary Tightening and High External Borrowing Cost Extinguish Investment
Central Banks Key Policy Rate (percent) and Russia’s CDS spreads (bps) for 5 year bonds
140
240
340
440
540
640
4
6
8
10
12
14
16
18
Russia’s Economy Avoided A Recession (2)Growth composition, percent, y-o-y
-15
-5
5
15
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Consumption Gross Fixed Capital FormationChange in inventories ExportImport Stat errorGDP growth
→ Tradable Sector Becomes Main Growth Engine
Contribution to GDP Growth By Sector, y-o-y, percent of GDP
0.0-2.7
1.3 1.80.5 0.3 0.4
5.0
-3.6
2.8 2.22.9
1.00.3
0.2
-0.4
0.0 -0.2
0.1
0.0 -0.1
-7.0
-5.0
-3.0
-1.0
1.0
3.0
5.0
2008 2009 2010 2011 2012 2013 2014
Tradable Non-tradable Public sector
World Bank Outlook for Russia:A Protracted Recession
Global Growth Moderately Rising
Global real GDP growth, percent, y-o-y
2009 2010 2011 2012 2013 2014e 2015f 2016f 2017fWorld -1.8 4.3 3.1 2.4 2.5 2.6 2.9 3.2 3.2High income -3.5 3.0 1.9 1.4 1.4 1.7 2.1 2.4 2.2Developing countries 3.0 7.8 6.3 4.7 5.0 4.5 4.5 5.1 5.3Euro area -4.5 2.0 1.7 -0.7 -0.4 0.9 1.4 1.7 1.6Russia -7.8 4.5 4.3 3.4 1.3 0.6 -3.8 -0.3 2.2
Russia’s Outlook Depends on Oil PricesGrowth in Global Oil Demand
(4.00)
(3.00)
(2.00)
(1.00)
-
1.00
2.00
3.00
4.00
2007Q1 2008Q3 2010Q1 2011Q3 2013Q1 2014Q3
mb/d, year over year growth
OECD
China
Non-OECD, ex China
Russia’s Growth Outlook is NegativeGDP growth, percent, y-o-y
-4.6
-1.0
3.4
1.3
0.6
-3.8
-0.3
-2.9
0.1
-5
-4
-3
-2
-1
0
1
2
3
2012 2013 2014 2015 2016
Lower-bound scenario Baseline scenario Upper-bound scenario
Real GDP Levels Fall Below 2012Real GDP, percent, 2012=100
97.2
96.2
100.0
101.3
101.9
98.097.7
99.0 99.1
95
96
97
98
99
100
101
102
2011 2012 2013 2014 2015
Lower-bound scenario Baseline scenario Upper-bound scenario
Shared Prosperity Achievements At Risk Poverty and Shared Prosperity
15.2
13.313.0
12.5
12.7
10.7
14.2
14.2
10.8
11.2
14.8
15.7
12.7
12.6
0.410
0.412
0.414
0.416
0.418
0.420
0.422
0.424
10
11
12
13
14
15
16
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Poverty rate, % Baseline scenarioLower-bound scenario Upper-bound scenarioGini (rhs)
Is the Middle Class Still Growing? Share of the Population with Per Capita Income in US$ ppp / day
0
50
100
more than 50 USD/day 25-50 USD/day10-25 USD/day 5-10 USD/dayless than 5 USD/day more than 10 USD/day
Gross capital formation, percent of GDP, and Total factor productivity growth
0
5
10
15
20
25
30
35
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
RussiaBRICS Average (excluding Russia)EU11 AverageResource Rich* Average
-15
-10
-5
0
5
10
15
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012Pe
rcent
Total Factor ProductivityCapitalLaborGDP Growth
Russia’s Investment and Productivity Challenge
How Will Russia Manage the Adjustment to Lower Oil Prices and Sanctions?
Assure technology and innovation transfer, e.g. technology that can
support exploration of less accessible oil and gas fields.
Counterbalance restricted access to external finance, e.g. effectively
invest natural resource revenues.
Boost investor and consumer confidence, e.g. careful management
of financial sector risks and fiscal buffers.
Special Focus NoteThe Economic Impact of Sanctions
The Economic Impact of Sanctions on RussiaStock market prices and trends and Exchange rate dynamics, Euro-Dollar basket
10
30
50
70
90
110
1200
1300
1400
1500
1600
1700
1800
1900
Trade volume, bln Rub (right axis) MICEX index
35
40
45
50
55
60
65
70
75
80
The Economic Impact of Sanctions on RussiaBond Issuance in US$ billion and Russia Corporate Emerging Market Bond Index for Russia
220
240
260
280
300
320
0
5
10
15
20
25
H1 2013 H1 2014 H2 2013 H2 2014
The Economic Impact of Sanctions on RussiaRussia’s Food and Beverage Imports by Country: Q3, 2013 and 2014 (US$ billion)
and Russia’s Cereal Imports by Country: Q3, 2013 and 2014 (US$ billion)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Q3/2013 Q3/2014
0
0.05
0.1
0.15
0.2
0.25
Q3/2013 Q3/2014
Thank you!For more information about the World Bank and its
activities in the Russian Federation, please visit: http://www.worldbank.org/en/country/russia
If you would like to be access our Russia Economic Reports, please visit:
www.worldbank.org/eca/rer
For questions and comments relating to this publication, please contact [email protected].
EXTRA SLIDES
Baseline Scenario ProjectionsMain economic indicators
2012 2013 2014 2015 2016
Oil price (US$ per barrel, WB average) 105.0 104.0 97.6 53.2 56.9
GDP growth, percent 3.4 1.3 0.6 -3.8 -0.3
Consumption growth, percent 6.4 3.9 1.5 -5.3 -1.9
Gross capital formation growth, percent 3.0 -6.6 -5.7 -15.3 1.1
General government balance, percent of GDP 0.4 -1.3 -1.2 -3.6 -3.1
Current account (US$ billions) 71.3 34.1 56.7 73.7 62.9
percent of GDP 3.6 1.6 3.0 6.0 4.4
Capital and financial account (US$ billions) -32.3 -56.2 -143.2 -122.1 -60.0
percent of GDP -1.6 -3.0 -7.7 -10.0 -4.2
CPI inflation (average) 5.1 6.8 7.7 16.5 8.0
Upper-bound Oil Price ScenarioMain economic indicators
2012 2013 2014 2015 2016
Oil price (US$ per barrel, WB average) 105.0 104.0 97.6 65.5 68.7
GDP growth, percent 3.4 1.3 0.6 -2.9 0.1
Consumption growth, percent 7.0 3.5 0.9 -3.0 -0.6
Gross capital formation growth, percent 1.5 -5.6 -8.2 -10.8 1.8
General government balance, percent of GDP 0.4 -1.3 -1.2 -2.8 -2.1
Current account (US$ billions) 71.3 34.1 56.7 61.7 54.0
percent of GDP 3.6 1.6 3.0 4.5 3.5
Capital and financial account (US$ billions) -32.3 -62.2 -143.2 -105.5 -48.6
percent of GDP -1.6 -3.0 -7.6 -7.7 -3.1
CPI inflation (average) 5.1 6.8 7.7 14.0 7.0
Lower-bound Oil Price ScenarioMain economic indicators
2012 2013 2014 2015 2016
Oil price (US$ per barrel, WB average) 105.0 104.0 97.6 45.0 50.0
GDP growth, percent 3.4 1.3 0.6 -4.6 -1.0
Consumption growth, percent 6.4 3.9 1.5 -6.6 -2.7
Gross capital formation growth, percent 3.0 -6.6 -5.7 -17.1 -0.4
General government balance, percent of GDP 0.4 -1.3 -1.2 -4.5 -2.6
Current account (US$ billions) 71.3 34.1 56.7 83.1 79.7
percent of GDP 3.6 1.6 3.0 7.1 5.8
Capital and financial account (US$ billions) -32.3 -62.2 -143.2 -130.2 -79.7
percent of GDP -1.6 -3.0 -7.6 -11.1 -5.8
CPI inflation (average) 5.1 6.8 7.7 17.5 9.0
How is this Crisis Different?GDP Reaction to External Shock in 2008-2009 and 2014
-25
-20
-15
-10
-5
0
5
10
15
20
Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09
Consumption Gross Fixed Capital FormationChange in stock ExportImport DiscrepancyGDP growth
-4
-3
-2
-1
0
1
2
3
4
5
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
Consumption Gross Fixed Capital FormationChange in stock ExportImport DiscrepancyGDP growth
Russia’s Diverging Growth PerformanceQuarterly GDP growth, percent, y-o-y
-12
-8
-4
0
4
8
12
OECD Oil-exporters RussiaOECD EU EmergingOther Emerging