Russian Federation. Recent Economic Developments and Challenges. October 2015 IMF MOSCOW OFFICE

Transcription

1 Russian Federation Recent Economic Developments and Challenges IMF MOSCOW OFFICE October 215 1

2 Outline Shocks affecting Russia s economy Policy Reaction: Monetary and Fiscal Policy Responses Current economic situation, impact in the region, and medium-term challenges Risks and Mitigating Factors 2

3 The Shocks 3

4 Lower International Energy Prices Oil prices decreased by about half resulting in a decrease in the US$ value of oil exports Energy Exports (US$ billion) year moving average Energy Exports one-year cummulative difference US$1 billion Q1-2 Q4-2 Q3-3 Q2-4 Q1-5 Q4-5 Q3-6 Q2-7 Q1-8 Q4-8 Q3-9 Q2-1 Q1-11 Q4-11 Q3-12 Q2-13 Q1-14 Q4-14 Q3-15 Q1-2 Q4-2 Q3-3 Q2-4 Q1-5 Q4-5 Q3-6 Q2-7 Q1-8 Q4-8 Q3-9 Q2-1 Q1-11 Q4-11 Q3-12 Q2-13 Q1-14 Q4-14 Q3-15 4

5 Lower Net External Financial Inflows Sanctions curtailed access to external financing resulting in net financial outflows during the last 12 months Net External Financial Inflows (US$ billion) year moving average Net external financial inflows one-year cummulative difference Q1-2 Q4-2 Q3-3 Q2-4 Q1-5 Q4-5 Q3-6 Q2-7 Q1-8 Q4-8 Q3-9 Q2-1 Q1-11 Q4-11 Q3-12 Q2-13 Q1-14 Q4-14 Q3-15 Q1-2 Q4-2 Q3-3 Q2-4 Q1-5 Q4-5 Q3-6 Q2-7 Q1-8 Q4-8 Q3-9 Q2-1 Q1-11 Q4-11 Q3-12 Q2-13 Q1-14 Q4-14 Q3-15 5

6 Combined effect of Shocks External shocks dented confidence and also prompted a short-lived deposit decrease..with combined negative effect in the balance of payments stronger than in Foreign Currency-denominated Deposits (US$ billion) Feb-8 Jul-8 Dec-8 May-9 Oct-9 Mar-1 Aug-1 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13 Dec-13 May-14 Oct-14 Mar-15 Aug Q1-2 Q4-2 Q3-3 US$15 billion one-year cummulative difference Q2-4 Q1-5 Q4-5 Q3-6 Q2-7 Q1-8 Q4-8 Q3-9 Q2-1 Q1-11 Q4-11 Q3-12 Q2-13 Q1-14 Q4-14 Q3-15 6

7 Lower Energy Prices and Fiscal Accounts Energy-related taxes and duties represented about 5 percent of federal fiscal revenues in 214 Lower oil prices resulted in a decrease in the US$ value of energy-related taxes of around US$1 billion 7

8 The Policy Response 8

9 Monetary Policy: New nominal anchor and temporary liquidity support Inflation targeting : 4 percent headline CPI inflation Ruble floats (freely) vis-à-vis other currencies Interest Rate management becomes the key monetary policy decision Liquidity Provision: new and expanded facilities 9

10 Monetary Policy: Policy rate and liquidity support Policy rates increased to re-anchor expectations and stabilize the FX market but were eased thereafter 3 2 Short-Term Interest Rates (percent) RUONIA CBR SF deposit CBR SF REPO MIACR CBR key rate while CBR liquidity support to banks remains higher than the historical norm Share of funding from CBR in banks liabilities (percent of total) jan-8 sep-8 jun-9 mar-1 nov-1 aug-11 maj-12 jan-13 okt-13 jun-14 mar-15 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 1

11 Financial Policies: Appropriate measures taken to stabilize the financial system Temporary Regulatory Forbearance (exchange rate, loan classification, negative valuation changes) Strengthened Foreign Exchange and Financial Infrastructure Support (expanded collateral and liquidity support options) Bank Recapitalization (Rb. 1 trillion program) 11

12 Fiscal Policy: Short-term stimulus with an eye in the medium-term A modest increase in the nonoil fiscal deficit is expected in 215 appropriate given negative output gap and stillample fiscal buffers Ruble depreciation helped adjust to lower US$ value of oil revenues Non-Oil Fiscal Deficit percent of GDP)

13 Current Economic Situation and Medium-term Challenges 13

14 The Real Exchange Rate depreciated amid lower Oil Prices. The floating Ruble facilitated the adjustment to external shocks and a realignment of relative prices CPI-based RER (Index 23-4=1) CPI-based Real exchange rate (23-4=1) 5-year moving average Actual - 5-year Moving average (percent difference) Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 14

15 inflation increased, with prices of tradable goods increasing more Exchange rate depreciation passed through to inflation CPI Inflation (annual change, percent) CPI (left axis) Exchange Rate depreciation Jan-8 May-8 Sep-8 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 with tradable good prices increasing more than non-tradable and administered prices Non Non Non Administered Administered Non Non Non Non Non Non Administered Non CPI Inflation by type of good ( as of September 215, annual change, percent)

16 bank credit growth decelerated and real wages decreased. Bank lending decelerated given tighter financial conditions and real wages decreased as economic slack increased. 4 3 Loans (annual growth rates, percent) 15 1 Real Wages (annual change, percent) Loans in Rubles Loans in FX, est. in USD Feb-9 Jul-9 Dec-9 May-1 Oct-1 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 16

17 prompting a decrease in the non-oil trade deficit Changing relative prices, lower and prompted a decrease in non-oil trade expensive credit, and lower real wages deficit despite lower prices for metals Non-oil Trade Deficit (US$ billion) 5-year moving average Non-oil trade deficit one-year cummulative difference US$7 billion Q1-2 Q4-2 Q3-3 Q2-4 Q1-5 Q4-5 Q3-6 Q2-7 Q1-8 Q4-8 Q3-9 Q2-1 Q1-11 Q4-11 Q3-12 Q2-13 Q1-14 Q4-14 Q3-15 Q1-2 Q4-2 Q3-3 Q2-4 Q1-5 Q4-5 Q3-6 Q2-7 Q1-8 Q4-8 Q3-9 Q2-1 Q1-11 Q4-11 Q3-12 Q2-13 Q1-14 Q4-14 Q

18 and a correction in the Current Account enough to cover external debt falling due Lower imports are helping offset lower energy exports and will help manage to pay external debt falling due Current Account (Percent of GDP) Refinancing Profile of External Debt (Billions of U.S. dollars) Corporations Banks Government Current account (average Q4214-Q3216) Q1 215Q2 215Q3 215Q4 216Q1 216Q2 216Q3 18

19 however GDP growth will be negative in 215 and recovery will be gradual Growth is expected to be negative in and the economy to operate below full capacity GDP Growth and Oil Prices (Annual growth, percent) Output Gap (Percent of trend GDP) GDP growth Oil Prices (right axis)

20 Structural reforms are needed to take advantage of better relative prices The economy operated close to full capacity in Capacity Utilization (percent) Capacity Utilization 5-year moving average Dec-95 Oct-96 Aug-97 Jun-98 Apr-99 Feb- Dec- Oct-1 Aug-2 Jun-3 Apr-4 Feb-5 Dec-5 Oct-6 Aug-7 Jun-8 Apr-9 Feb-1 Dec-1 Oct-11 Aug-12 Jun-13 Apr-14 Feb-15 and long term drivers of growth are expected to remain modest Employment and Investment (Annual growth, percent) Employment growth Gross Fixed Investment (right axis)

21 With respect to Macroeconomic Policies Monetary policy should continue normalizing once inflation and inflation expectations are anchored towards the medium term inflation target. Although buffers are ample, fiscal stimulus should be limited as the non-oil deficit remains large (fiscal rule in its current is backward looking and results in higher-than-warranted deficits). Consolidation should preserve public investment 21

22 Impact on the EEU Countries: Mainly through the Current Account Remittances from Russia Exports to Russia Foreign Direct Investment from Russia Ruble volatility may create some further volatility in bilateral exchange rates 22

23 Ties With Russia Go Beyond Exports; Include Remittances, FDI And Confidence Linkages with Russia Ex ports Imports Remittances FDI ARM GEO KGZ TJK AZE KAZ TKM UZB 23 <3% of GDP 3-1% of GDP >1% of GDP

24 Risks and Mitigating Factors 24

25 Risks Downside Risks Lower Oil Prices for longer A mark down in growth in emerging economies (hard-landing in China) Increase in Geopolitical Tensions A bout of financial volatility Disruptive Asset Price shifts Upside Risks Oil prices rebound Geopolitical tensions subside Structural Reforms advance faster 25

26 Several (and substantial) mitigating factors 1. Low public debt 2. Low (headline) fiscal deficit 3. Large FX reserve buffers 4. Current account surplus 5. Positive IIP 6. Flexible exchange rate regime 7. More competitive real exchange rate level 26

27 Большое Спасибо 27