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10 - 16 September
2016
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From
the CEO OF EMIS
Back in March I wrote about the need for Russia to move away from its over-reliance on the oil sector and to diversify its revenue streams. A report this week from the International Institute of Finance underlines the debilitating effects of low oil prices on the Russian economy. Russia’s budget was partly dependent on the price of oil hitting $50 per barrel this year. The actual price has averaged out at $43, resulting in the country having to use up much of its emergency fund to plug the gap.
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Once the emergency fund run out, the only option for the government will be to implement further spending cuts. This is an unpleasant prospect for a country where monthly wages fell by nearly 5% in real terms last year according to official estimates.
GDP projections have also been reduced with the economic ministry forecasting a contraction of 0.5-0.6% this year compared to an earlier prediction of 0.2%. While growth is expected to return in 2017, it will be anaemic compared to other countries in the region and certainly not enough to signal any meaningful economic revival.
President Putin insisted at the recent G20 summit that his administration was working hard to limit the country’s dependency on exports of hydrocarbons and on improving the business climate. The uncomfortable truth is that conditions for business in Russia show no signs of improving. Law enforcement continues to appear weak in the face of widespread corruption and attempts at economic reform have been abandoned.
Russia’s economic problems, although well-documented, tend to be overlooked due to the country’s increasing presence on the world stage with its intervention in Syria, annexation of Crimea and the strange role it appears to be playing in the US elections. These are helpful distractions for President Putin and upcoming parliamentary elections are unlikely to loosen his grip. But the question remains as to just how long the Russian population will put up with a failing economy and declining living standards. Structural economic reform remains Russia’s only way out of this damaging period of stagnation.
Guy Dunn
Chief Executive Officer.
P.S. Here are some articles on the situation in Russia featured on EMIS last week.
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DESPITE RECESSION, KREMLIN KEEPS PUBLIC MOOD HIGH - OP-ED
By any measure, the Russian economy is deep in a classic recession: GDP has dropped for the sixth consecutive quarter. If Russia had political competition, these elections would pose a challenge for both the ruling party and the opposition. But without real competition, politicians are under little pressure to lift the economy out of the current crisis.
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RUSSIA: REAL DISPOSABLE INCOMES ARE FALLING FASTER THAN EXPECTED
Real disposable incomes are falling faster the previously expected, EconMin department head Tremasov said on Thursday. The new forecast envisages real disposable incomes of households to fall by 4.7-4.9% in 2016 compared to 2.8% contraction expected in May.
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RUSSIAN POLITICIANS AVOID MAKING UNPOPULAR DECISIONS UNTIL THE 2018 ELECTIONS
Russia's parliamentary elections are rapidly approaching, but this time politicians aren't making any pie-in-the-sky promises. After all, pie costs money and they don't have any. But they are also careful to avoid making any unpopular decisions, preferring to postpone them for another 18 to 24 months until after the 2018 presidential election.
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Infographic
of the week
South Korea's transport sector is one of the most developed in the world. The industry has grown rapidly over the last ten years, driven by public investment in infrastructure and incentives for private investment to the sector thanks to public–private partnerships, low taxes and relaxed regulations.
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Weekly
News summary
Below
are the most read articles in the past week on EMIS
Perspectives, our daily blog of
emerging market news and insights.
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IRAN, RUSSIA COMMENCE $10BN NUCLEAR POWER PROJECT
Iran and Russia officially started on Friday building a $10 billion project to build the second stage of the Bushehr nuclear power plant, newswire Prime reported .
Read
more…
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ANGOLA’S ANNUAL CPI INFLATION AT 38.2% IN AUG
Angola’s annual inflation, measured by the consumer price index (CPI) in the Luanda province, stood at 38.2% in August, up from 35.3% in July, CEEMarketWatch - Daily News reported.
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more…
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UGANDA, RWANDA, TANZANIA AIM TO LURE $10BN PRIVATE INVESTMENTS
Uganda, Rwanda and Tanzania aim to lure some $10 billion private investments to speed up their economic growth and reduce powerty, the East African reported.
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more…
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