Sberbank: ‘New economic model’ developed in Russia, growth likely to resume in 2016

By Andrei Skvarsky.

Sberbank, Russia’s biggest lender, this week came up with an unusually upbeat economic forecast, arguing that the Russian economy has adjusted to the low oil price and is likely to resume growth in 2016.

Analysts at Sberbank CIB, the lender’s investment arm, said in a report that they “see clear signs that the economy has adjusted” to the low oil price, that “most macro indicators have bottomed out”, that inflation “is falling”, and that “we will likely see positive growth in 2016”.

“As the dust settles, the shape of Russia’s new economic model is becoming clear,” they said.

The report, written by Sberbank CIB chief strategist Kingsmill Bond, strategist Andrey Kuznetsov and chief research editor Cole Akeson, predicts long-term growth rates at around 2% and a structurally weaker rouble.

Consumer demand will be “losing its role as the main driver of economic growth”, the paper says.

The report forecasts higher corporate earnings, which would benefit the financial sector, and argues that the weaker rouble and cheaper labour are likely to mean a tailwind to exporters and tradable domestics.

It does warn, though, that the “economic rebalancing” might mean a harder time for investors because of “heavy overweights in growth sectors from long-only funds” and because “stocks pricing in a rapid expansion of consumer demand may struggle to meet investors’ expectations” and so they would have to “re-evaluate the growth stories of the past.”

Sberbank’s optimism is unlikely to be shared by too many.

The opposite camp includes former Russian finance minister Alexei Kudrin, today a much-cited expert whom, according to sources cited by Bloomberg, the Kremlin is considering bringing back into a top government job.

Kenneth Rapoza of Forbes magazine cited Kudrin as saying November’s Russian macro statistics showed a “deterioration”, that economic environment in Russia is “unstable” and that the country’s economy will be in for a “continued fall” if oil prices stay at today’s level for “another six months or a year”.

After OPEC refused at the end of November to cut the production of oil and its price slid further, Russian Finance Minister Anton Siluanov argued that a price of $30 per barrel was possible “in some periods” in 2016.

On the other hand, a monthly survey by Deutsche Boerse-owned intelligence firm MNI Indicators suggested that in December Russian companies were in higher spirits about the country’s overall business environment than they had been in November.

MNI Indicators chief economist Philip Uglow said the survey returns were consistent with “the fragile stabilisation in conditions seen in recent months and a slow recovery for the Russian economy” but that “there is a risk that conditions could worsen again over the short term”.

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