Transcript presentation

The Dawn of a New Economic Era?
Russia Economic Report
April 2015 | Edition No. 33
Main messages
1
• A steep drop in oil prices, geopolitical tensions with sanctions shocked
Russia’s economy an economy already impacted by lingering structural problems.
experienced two • The economy was successfully stabilized. The shocks hit the economy
shocks in 2014, but late in the year. Growth was 0.6 percent.
avoided a recession • Weaker Ruble and trade restrictions revived manufacturing activity.
2
• The full effects of the two shocks will become evident in 2015 and
Growth prospects for likely push the Russian economy into recession.
2015-2016 are • The World Bank baseline scenario projects a contraction of 3.8
negative percent in 2015 and a contraction of 0.3 percent in 2016.
• Two alternative scenarios with a lower- and upper-bound oil price.
3
• The World Bank baseline outlook sees the poverty rate increasing
Achievements in from 10.8 percent in 2013 to 14.2 percent in 2015 and in 2016.
shared prosperity are • This would be the first significant increase since the 1998-1999 crisis
under threat due to declining income and consumption and high inflation.
4
• New realities will have the potential to alter the structure of the
The impact of economy and the ways Russia integrates with the rest of the world.
sanctions is likely to • Strategic policies needed to balance old and new risks to the
linger for a long time economy: (1) manage adjustment to the lower oil price and sanctions;
(2) lessen structural growth constraints.
Russia Economic Report No. 33
1. Recent Economic
Developments
2. Outlook and Risks
3. The Economic
Impact of
Sanctions
Recent Economic Developments:
A Year of Economic Turmoil
The Tale of Two Shocks: Oil Prices and Impact
of Economic Sanctions
Oil Prices and Ruble Exchange Rate in 2014
120
30
110
35
100
40
90
45
80
50
70
55
60
60
50
65
40
70
Oil price
Rub/USD (right hand axis)
→ High Inflation and Declining Real Wages
Dampen Consumption
Russia’s CPI inflation by components and Real wage growth, percent, y-o-y
15
18
16
10
14
12
5
10
8
0
6
-5
4
2
-10
0
2011
Food
2012
2013
Non-Food
2014
Services
2015
CPI
2009
2010
Nonmarket
Tradables
2011
2012
2013
2014
Nontradables
Total
Russia’s Economy Avoided A Recession
Growth composition, percent, y-o-y
15
5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
-5
-15
Consumption
Change in inventories
Import
GDP growth
Gross Fixed Capital Formation
Export
Stat error
→ Monetary Tightening and High External
Borrowing Cost Extinguish Investment
Central Banks Key Policy Rate (percent) and Russia’s CDS spreads (bps) for 5 year bonds
18
640
16
14
12
540
440
10
8
340
6
4
240
140
Russia’s Economy Avoided A Recession (2)
Growth composition, percent, y-o-y
15
5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
-5
-15
Consumption
Change in inventories
Import
GDP growth
Gross Fixed Capital Formation
Export
Stat error
→ Tradable Sector
Becomes Main Growth Engine
Contribution to GDP Growth By Sector, y-o-y, percent of GDP
5.0
3.0
0.2
2.8
5.0
0.1
2.9
1.0
-1.0
2.2
1.3
0.0
0.0
-2.7
1.8
0.5
1.0
0.3
0.0
0.3
0.4
-0.1
2012
2013
2014
-0.2
-3.0
-3.6
-5.0
-0.4
-7.0
2008
2009
2010
Tradable
2011
Non-tradable
Public sector
World Bank Outlook for Russia:
A Protracted Recession
Global Growth Moderately Rising
Global real GDP growth, percent, y-o-y
World
High income
Developing countries
Euro area
Russia
2009
-1.8
-3.5
3.0
-4.5
-7.8
2010
4.3
3.0
7.8
2.0
4.5
2011
3.1
1.9
6.3
1.7
4.3
2012
2.4
1.4
4.7
-0.7
3.4
2013
2.5
1.4
5.0
-0.4
1.3
2014e
2.6
1.7
4.5
0.9
0.6
2015f
2.9
2.1
4.5
1.4
-3.8
2016f
3.2
2.4
5.1
1.7
-0.3
2017f
3.2
2.2
5.3
1.6
2.2
Russia’s Outlook Depends on Oil Prices
Growth in Global Oil Demand
mb/d, year over year growth
4.00
3.00
Non-OECD, ex China
2.00
1.00
China
(1.00)
OECD
(2.00)
(3.00)
(4.00)
2007Q1
2008Q3
2010Q1
2011Q3
2013Q1
2014Q3
Russia’s Growth Outlook is Negative
GDP growth, percent, y-o-y
3
3.4
2
1
1.3
0.1
0.6
0
-0.3
-1
-1.0
-2
-2.9
-3
-3.8
-4
-4.6
-5
2012
2013
Lower-bound scenario
2014
Baseline scenario
2015
2016
Upper-bound scenario
Real GDP Levels Fall Below 2012
Real GDP, percent, 2012=100
102
101.9
101
101.3
100
99.0
100.0
99.1
99
98.0
98
97.7
97.2
97
96
96.2
95
2011
2012
Lower-bound scenario
2013
Baseline scenario
2014
2015
Upper-bound scenario
Shared Prosperity Achievements At Risk
Poverty and Shared Prosperity
16
15
15.7
15.2
0.422
14.8
14.2
14
0.424
0.420
14.2
0.418
13.3
13
12.6
13.0
12.7
0.416
12.7
12.5
12
0.414
11
0.412
11.2
10.7
10.8
10
0.410
2006
2007
2008
2009
2010
2011
Poverty rate, %
Lower-bound scenario
Gini (rhs)
2012
2013
2014
2015
2016
Baseline scenario
Upper-bound scenario
Is the Middle Class Still Growing?
Share of the Population with Per Capita Income in US$ ppp / day
100
50
0
more than 50 USD/day
10-25 USD/day
less than 5 USD/day
25-50 USD/day
5-10 USD/day
more than 10 USD/day
Russia’s Investment and Productivity Challenge
Gross capital formation, percent of GDP, and Total factor productivity growth
15
35
30
10
25
5
5
0
-5
-10
-15
Total Factor Productivity
Capital
Labor
GDP Growth
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
Russia
BRICS Average (excluding Russia)
EU11 Average
Resource Rich* Average
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
10
0
1993
15
Percent
20
How Will Russia Manage the Adjustment
to Lower Oil Prices and Sanctions?
Assure technology and innovation
transfer, e.g. technology that can
support exploration of less accessible
oil and gas fields.
Counterbalance restricted access to
external finance, e.g. effectively invest
natural resource revenues.
Boost investor and consumer
confidence, e.g. careful management of
financial sector risks and fiscal buffers.
Special Focus Note
The Economic Impact of Sanctions
The Economic Impact of Sanctions on Russia
Stock market prices and trends and Exchange rate dynamics, Euro-Dollar basket
35
1900
1800
1700
110
40
90
45
50
1600
70
1500
50
1400
30
1300
55
60
65
70
1200
10
75
80
Trade volume, bln Rub (right axis)
MICEX index
The Economic Impact of Sanctions on Russia
Bond Issuance in US$ billion and Russia Corporate Emerging Market Bond Index for Russia
25
320
20
300
15
280
10
260
5
240
0
220
H1 2013 H1 2014
H2 2013 H2 2014
The Economic Impact of Sanctions on Russia
Russia’s Food and Beverage Imports by Country: Q3, 2013 and 2014 (US$ billion)
and Russia’s Cereal Imports by Country: Q3, 2013 and 2014 (US$ billion)
0.25
1.8
1.6
0.2
1.4
1.2
0.15
1
0.8
0.1
0.6
0.4
0.05
0.2
0
0
Q3/2013
Q3/2014
Q3/2013
Q3/2014
Thank you!
For more information about the World Bank and its
activities in the Russian Federation, please visit:
http://www.worldbank.org/en/country/russia
If you would like to be access our Russia Economic Reports,
please visit:
www.worldbank.org/eca/rer
For questions and comments relating to this publication,
please contact [email protected].
EXTRA SLIDES
Baseline Scenario Projections
Main economic indicators
2012
2013
2014
2015
2016
105.0
104.0
97.6
53.2
56.9
GDP growth, percent
3.4
1.3
0.6
-3.8
-0.3
Consumption growth, percent
6.4
3.9
1.5
-5.3
-1.9
Gross capital formation growth, percent
3.0
-6.6
-5.7
-15.3
1.1
General government balance, percent of GDP
0.4
-1.3
-1.2
-3.6
-3.1
Current account (US$ billions)
71.3
34.1
56.7
73.7
62.9
3.6
1.6
3.0
6.0
4.4
-32.3
-56.2
-143.2
-122.1
-60.0
-1.6
-3.0
-7.7
-10.0
-4.2
5.1
6.8
7.7
16.5
8.0
Oil price (US$ per barrel, WB average)
percent of GDP
Capital and financial account (US$ billions)
percent of GDP
CPI inflation (average)
Upper-bound Oil Price Scenario
Main economic indicators
2012
2013
2014
2015
2016
105.0
104.0
97.6
65.5
68.7
GDP growth, percent
3.4
1.3
0.6
-2.9
0.1
Consumption growth, percent
7.0
3.5
0.9
-3.0
-0.6
Gross capital formation growth, percent
1.5
-5.6
-8.2
-10.8
1.8
General government balance, percent of GDP
0.4
-1.3
-1.2
-2.8
-2.1
Current account (US$ billions)
71.3
34.1
56.7
61.7
54.0
3.6
1.6
3.0
4.5
3.5
-32.3
-62.2
-143.2
-105.5
-48.6
-1.6
-3.0
-7.6
-7.7
-3.1
5.1
6.8
7.7
14.0
7.0
Oil price (US$ per barrel, WB average)
percent of GDP
Capital and financial account (US$ billions)
percent of GDP
CPI inflation (average)
Lower-bound Oil Price Scenario
Main economic indicators
2012
2013
2014
2015
2016
105.0
104.0
97.6
45.0
50.0
GDP growth, percent
3.4
1.3
0.6
-4.6
-1.0
Consumption growth, percent
6.4
3.9
1.5
-6.6
-2.7
Gross capital formation growth, percent
3.0
-6.6
-5.7
-17.1
-0.4
General government balance, percent of GDP
0.4
-1.3
-1.2
-4.5
-2.6
Current account (US$ billions)
71.3
34.1
56.7
83.1
79.7
3.6
1.6
3.0
7.1
5.8
-32.3
-62.2
-143.2
-130.2
-79.7
-1.6
-3.0
-7.6
-11.1
-5.8
5.1
6.8
7.7
17.5
9.0
Oil price (US$ per barrel, WB average)
percent of GDP
Capital and financial account (US$ billions)
percent of GDP
CPI inflation (average)
How is this Crisis Different?
GDP Reaction to External Shock in 2008-2009 and 2014
20
5
15
4
10
3
5
2
0
1
-5
0
-10
-1
-15
-2
-20
-3
-25
-4
Q1 08
Q2 08
Consumption
Change in stock
Import
GDP growth
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Gross Fixed Capital Formation
Export
Discrepancy
Q1 13
Q2 13
Consumption
Change in stock
Import
GDP growth
Q3 13
Q4 13
Q1 14
Q2 14
Q3 14
Gross Fixed Capital Formation
Export
Discrepancy
Russia’s Diverging Growth Performance
Quarterly GDP growth, percent, y-o-y
12
8
4
0
-4
-8
-12
OECD Oil-exporters
OECD
Other Emerging
Russia
EU Emerging