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Putin is hoping to turn the boat around this year. In his first address to the super-rich delegates of the Davos World Economic Forum since 2009 the Russian president invited investors to return this year in which the Kremlin is hoping to see an economic rebound.
The economic fallout from the pandemic, travel restrictions and a slump in global energy prices hit Russia hard. Metals, mining and hydrocarbon sectors, which all make up a large part of the Russian economy, were hardest hit and Russian companies took to deleveraging in the face of the global slowdown, putting their own investment plans on hold as well.
The development of Russian fixed investment in general was very weak in the third quarter, according to Bank of Finland Institute for Economies in Transition (BOFIT). “Their number decreased for the third consecutive quarter and was 6% lower than in the corresponding period of the previous year. It is good to note that in many other emerging economies, investment clearly recovered in the third quarter. In Russia, fixed investment peaked in the first ten years of 2013,” BOFIT said in a weekly report.
Down by 95% year-on-year in 2020, the last time Russia saw such a low level of FDI was in 1994, reports the Moscow Times, when the economy was still reeling from the breakup of the Soviet Union.
The International Monetary Fund (IMF) has estimated that 60% of investment into Russia comes from “shell companies” — a higher share than any other major economy. Official figures name tax havens like Cyprus and the Netherlands as the main sources of FDI, but it is widely believed this is just Russian offshore money “round tripping.” bne IntelliNews’ o wn investigation showed that the USA is actually the biggest investor into Russia, but much of this money comes via the tax havens as well making it difficult to identify.
In a related result the CBR also found that Russia’s current account surplus halved in 2020 to $32.5bn, or 2.2% of GDP, but didn't fall to zero as was expected and is expected to double this year.
Russia’s balance of payments remained in a healthy state in 2020 despite the pandemic. In 2020, Russia posted a current account surplus of $32.5bn, twice lower than the $64.8bn in 2019, but still is a positive achievement, given the recession and a spike in capital outflows caused by the pandemic.
In 2020 exports from Russia fell 21.5% y/y to $329.5bn while imports were down 5.7% y/y ($2401.bn). While the volume of foreign direct investment fell by a massive 20 times to $1.4bn at the same time net private capital outflows doubled to $47.8bn from $22.1bn in 2019.
67 RUSSIA Country Report February 2021 www.intellinews.com
