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bne March 2020 Eastern Europe I 39
The main unknown now is the impact of the Coronavirus that may cause the CBR to revise its macroeconomic outlook for the rest of the year. The February cut
in rates was based on macroeconomic projections formulated in December, which need updating.
China’s economy will almost certainly be affected: the IMF was already predicting that China’s economy would slow mildly in 2020 from 6.1% in 2019 to 5.9% in 2020, but the impact of the virus will almost certainly slow growth in China by more than the expected 0.2%pp.
“We believe there is a significant probability that the extent of such forecast revisions might warrant an out-of-turn release of CBR’s projections in March, if either the February inflation data proves out of line with the CBR’s December numbers or the growth numbers (particularly on exports and investments) come below the current projections,” Isakov said.
The December economic forecast includes the following assumptions:
oil is assumed to average $55 per barrel, inflation to range 3.5-4.0% year on
year by December 2020, GDP to expand 1.5-2.0%, based predominantly on
a turnaround in investment activity (expected to accelerate to +3.5-4.5% from +1.4% y/y in 2019) and export volumes (expected to expand +2.0- 2.5% y/y vs. the decline of 2.1% y/y
in 2019), reported VTBC.
“The CBR's balance of payments projections for 2020 now see a $5bn slimmer current account surplus (the 2020 current account balance was revised to $47bn, from $52bn) due to the slightly higher imports of goods
and services, which are expected to
be offset by a lower outflow of private capital. This might reflect the halt in FDI outflows registered in 2019 and the CBR's expectations of that continuing in 2020 (see our Balance of Payments 2019 sets record for international inflows into Russian public debt, of 17 January),” said Isakov.
Prime Minister Mikhail Mishustin has been cleared of corruption charges
bne IntelliNews
Prime Minister Mikhail Mishustin has been cleared of corruption charges after his former employer UFG Private Equity revealed he had made $35mn while working for the fund as a senior executive between 2008 and 2010.
Anti-corruption blogger and opposition activist Alexei Navalny investigated Mishustin following his appointment as prime minister in January and claims that the new prime minister has assets worth $45mn, mostly held under his wife’s name. While the money itself is not proof of corruption, the implication was that Mishustin was profiting from his position as head of the Russian federal tax service, where he worked for the last decade since leaving investment banking.
Moreover, Navalny found that Mishustin controls his money and assets with a variety of non-transparent holdings and proxies.
But the initial capital Mishustin earned at UFG is sufficient to explain the prime minister’s wealth and an increase to $45mn over a decade represents a very modest return on investment. Following the global financial crash in 2008 the Russian stock market performed well in the following three years until recession struck and as bne IntelliNews reported in its review of Russian stock market rallies, 2009, 2016 and 2019 were all vintage years for equities, returning 129%, 52% and 45% respectively.
“As a partner, [Mishustin] was included in the ownership structure, with
a 25% share in funds, which had already [been] created, and he also became a founder in new funds with a 25% share,” UFG managing partner Polina Gerasimenko explained in a letter to RBC outlining Mishustin’s time at the fund as cited by RBC.
Mishustin was entitled to an equal split of UFG’s earnings — 2% of assets under management and another 20% of any annual returns, which exceeded performance targets of 5-8% — while he was a senior partner at the fund. When Mishustin joined UFG, the group already had $2bn under management, Gerasimenko said.
UFG paid $33.5mn to a Mishustin family trust to buy back part of this stake between 2010-2015, the letter says. The final portion of Mishustin’s shares was sold last year for an undisclosed sum. In addition, Mishustin also took home a salary of $2.5mn in 2009.
Navalny previously calculated that Mishustin’s family held assets worth RUB2.8bn ($45mn), noting that Mishustin’s wife earned $12mn while he was at the tax service despite having no apparent business interests.
Gerasimenko said those earnings came from the UFG shares in the Mishustin family trust, which was held in his wife’s name between 2010-2013, reports the Moscow Times.
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