Page 24 - RusRPTJun21

Business confidence has been recovering after being knocked off its feet last year by the coronacrisis, falling to a low of -7.3 in the autumn of 2020, still not as low in the previous two years when it fell to -8.
Russian business confidence is very season with the owners of businesses always being more depressed in the autumn and the most optimistic in the spring and early summer months when the index typically rises to -1 or -2.
Last year was an exception when even in the summer months the best the index did was to rise to -4.7. The autumn fall in confidence was offset last year as the first vaccines appeared in November inspiring optimism that the pandemic would be over in the first half of this year, as appears to be the case.
However, the bounce back in optimism is unusually strong and April’s null result is the first time the confidence index has broken into positive territory for a decade. Prior to that the index got well above zero at the height of the noughties boom in 2006 and 2007 to peak at an all time high of +7 in 2007.
Those two years saw a reversal of over a decade of capital flight as Russian businessmen for the first time ever believed in the future of their own country and some $350bn of funds returned from offshore havens as Russians started to invest in the domestic economy. The global financial crisis in 2008 put pay to that optimism and the same amount of money flowed out of Russia that year as the confidence index crash to its all time low of -20.
The mood amongst businesspeople is certainly very buoyant as the Russian business confidence survey run by Rosstat every month has turned positive for the first time in eight years, and for the second time ever. The index was at zero in April, after it was knocked off its feet by last year’s coronacrisis. However, it fell to a low of -7.3 in November, which is less than the -8 of the previous two years its fall offset to an extent by the appearance of the first vaccines to counter the coronavirus (COVID-19) pandemic. The only other time the index has been positive was for eight months during the height of the noughties boom in 2006 and 2007, before the 2008 crisis knocked the index back to its all time low of -20.
Some have argued that Russia’s economy has just started a new super cycle that will be fed by the boom in commodity prices currently under way. The price of iron is at a nine-year high and copper prices are at an all time high and expected to stay there, driven by the rising demand generated by electronic gadgets and electric cars. Oil prices have also recovered and are comfortably over $60 a barrel – well above the budget’s breakeven price of $42 – which is also producing cash to prime the pump. All the conditions are in place to drive growth, but the Russian government is still grappling with raising investment levels into its 12 national projects which is the policy vehicle that is supposed to drive the next round of long-term growth.
The consumer confidence index, which reflects the aggregate consumer expectations of the population, in the first quarter of 2021 compared to the fourth quarter of 2020 increased by 5%age points (pp) and amounted to -21% in the first quarter - its best result in a year – but is only measured quarterly and has not been updated for May. So far consumer confidence in the first
24 RUSSIA Country Report June 2021 www.intellinews.com