Deutsche Boerse’s MNI Indicators: Russian companies face credit crunch

By Andrei Skvarsky.

According to Deutsche Boerse-owned intelligence firm MNI Indicators, Russia’s economic downturn and foreign policy problems are pushing Russian companies closer and closer to a credit crunch.

Loans are generally harder to obtain in Russia’s current economic environment but the Ukraine-related Western sanctions are making matters worse by shutting off opportunities for Russian businesses to raise capital abroad, MNI Indicators said in reporting February’s MNI Russia Business Sentiment survey.

MNI Indicators Business Sentiment is a monthly poll among executives at manufacturing, service, construction and agricultural companies – 200 firms altogether – listed on the Moscow Exchange.

Respondents are asked whether they think a particular business activity has increased, decreased or remained the same compared with the previous month, and what their expectations are for three months ahead.

The responses form the basis for an MNI Russia Business Sentiment Indicator, a chart where readings above 50 show expansion, those below 50 show contraction, and a mark of 50 means no change.

The surveys were launched in March 2013.

February’s indicator put general business sentiment at the lowest level in the surveys’ history, 42.0, which was a 14.6% drop from January’s 49.2, even though about three quarters of respondents thought that overall business conditions had remained unchanged since the previous month.

The Availability of Credit part of the indicator was also at the lowest point since the surveys began. As a result, the Financial Position index fell below the 50 mark for the first time in the history of the polls.

The New Orders and Production indexes hit all-time lows as well, with unplanned inventories having built up at a record pace.

The only index to show a rise was Export Orders, which climbed to the highest point since July 2014 because of the weak ruble.

“Russian companies are facing a torrid time with high inflation, high interest rates, weak demand, exchange rate volatility and a lack of credit all hurting. It’s little wonder that sentiment is at a record low,” said MNI Indicators chief economist Philip Uglow.

“The one glimmer of hope in our survey came from exporters who at last appear to be capitalising on the weaker exchange rate. Unfortunately this won’t be enough to stop Russia sliding into a deep recession this year.”

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