By Andrei Skvarsky.
A survey by the Deutsche Boerse group’s intelligence company MNI Indicators suggests there has been slightly more business optimism among Russian companies this month than in December, but that their overall sentiment has remained negative because of the Ukraine-related Western sanctions, low oil prices and the depreciating ruble.
MNI Indicators attributed January’s sentiment boost to seasonal demand.
A statement summing up the findings of what had been the latest of monthly polls of Russian business executives by MNI Indicators said 60% of them felt that overall business conditions had not changed since December, and that around one-fifth believed they had worsened.
The availability of loans from the West “had been squeezed to a record low due to the Western capital restrictions, bringing the total fall since January 2014 to 30%”, and pushing companies’ financial status down to “the worst level in the survey’s history”, the statement said.
The weaker ruble was still seen helpful by businesses but it simultaneously drove up costs for companies, forcing them to raise the prices of their own goods and services.
The depreciated currency led to an increase in export orders, and the Russian New Year holiday helped to boost domestic orders, but unsold goods had been piling up and the amount reached a record high as supply had outstripped demand.
MNI Indicators surveys cover about 200 companies – manufacturing, service, construction and agricultural firms – listed on Moscow Exchange.
“While this was the second consecutive month that business sentiment has increased, it remains depressed. Weak demand has put upward pressure on stock levels while sharply higher inflationary pressures will likely depress activity further,” said MNI Indicators chief economist Philip Uglow.
“A junk credit rating will add to the woes of large Russian companies who are already finding it difficult to service their existing debt, whilst the threat of additional sanctions threatens to cause the financial situation to deteriorate further,” Uglow said.
On January 26, international ratings agency Standard & Poor’s slashed Russia’s sovereign credit rating down to below investment grade and said the outlook was negative, while other rating agencies demoted the country to their lowest investment grade.
The European Union on January 29 extended its sanctions against Russia by six months in response to a major outbreak of fighting in eastern Ukraine that the EU blames on Moscow.