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30 I Outlooks 2018 bne February 2018
Russia Outlook 2018
bne IntelliNews
Russia needs a new economic mod- el and 2018 is the year that one will be chosen - or not. First the country needs to get through a presiden- tial election in March (that will almost certainly be won by president Vladimir Putin). After that the Kremlin will turn to making reforms, but the effects of any reforms that do happen are unlikely to kick in until the second half of the year.
Russian politics will be dominated in the first quarter by the presiden- tial elections slated for March.
The elections themselves are a non- event as President Vladimir Putin is bound to win; the latest poll by inde- pendent pollster the Levada Center found 67% of Russians would vote
for Putin, with his nearest competi- tors, nationalist firebrand and head of the Liberal Democratic Party of Rus- sia (LDPR) Vladimir Zhirinovsky, as well as anti-corruption blogger and opposition leader Alexei Navalny both polling at a meagre 2% of the vote.
Overall, Putin’s popularity rating remains above 80% and 57% of the population think that Russia is moving in the right direction versus the 27% who don't.
Russia’s economy is out of recession with the economy putting in three
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consecutive quarters of growth in 2017 and likely to end the year close to the government’s target of 2% growth. But the recovery remains uneven,
with most hopes placed on consump- tion driving faster growth in 2018.
The petro-fuelled growth model was already exhausted in 2013 when growth fell to zero (see chart). Without major reforms to unblock structural restraints, growth will be constrained to around 2% for the foreseeable future, which for an emerging market means virtual stagnation.
The banking sector is coming out of the other side of three years of hell, and has
now chalked up two years of profit.
But there are still many problems with the banking sector. The CBR is still only half way through its clean up of the sector and increasingly taking on the larger, well-connected banks, which are too big for even the CBR to bail out.
Also the vast majority of the profits
are being earned by state-owned retail behemoth Sberbank, which enjoys considerable monopolistic advantages.
Falling interest rates have improved net interest margins (NIMs), allowing banks to earn their way out of trouble, but the
Russia GDP annual vs quarters 2000-1Q17