By Andrei Skvarsky.
Deutsche Boerse’s data-providing subsidiary MNI Indicators says business confidence among some of Russia’s largest companies bounced back sharply in January from a “record low” in December but warns that the upturn may be temporary.
The MNI Russia Business Indicator rocketed to 57.9 in January from 45.5 in December, to register its highest level since September 2013, MNI Indicators said in a statement, citing its latest monthly poll of Russian executives at companies listed on Moscow Exchange.
Both production and new orders bounced back to levels not seen since October.
Firms are benefiting from the past year’s ruble depreciation. The MNI Effect of the Rouble Exchange Rate Indicator rose to a record high of 56.9 in January as more companies said the exchange rate was helping their business.
However, part of the rise is likely to be seasonal because of the festive period – January 1 to January 8 is a national non-working period in Russia – and apparent optimism over the Sochi Winter Olympics, which begin in February, MNI Indicators argues.
MNI Indicators Chief Economist Philip Uglow argues that Russia still needs structural reforms for sustained growth.
“It looks like much of the December downturn was seasonal with business sentiment rising sharply at the start of 2014,” Uglow says.
“It is far too early, though, to say that the Russian economy has turned the corner. The Sochi Olympics looks like it has given a welcome boost to business confidence this month and we’ll need to see how sentiment settles after the games have finished. The reality is that growth fell to a four-year low in 2013 and the Sochi Olympics will not cure Russia’s economic problems. President Putin has some tough calls to make on structural changes to the country’s growth model if Russia is to achieve sustained future growth,” the economist says.