Page 19 - RusRPTMay20

However, one of the consequences of this policy is that while the economy may not collapse and the government spending plans can progress as originally conceived, companies will stop investing and that will exacerbate the de facto stagnation Russia has already been experiencing over the last five years. The effect is most noticeable in the oil sector, where most of Russia’s western Siberian oil fields are mature. In a recent​ ​interview​ with ​bne IntelliNews ​Valery Borisov, the CFO of ChelPipe, pointed out that the rate of drilling has tripled in recent years for only nominal gains in production. Without continuous investment Russia’s oil production will start to fall and the same is true in many other industries. That will lead to fresh budget problems.
But it is not all bad news. Some sectors will escape largely unscathed like the agricultural sector, production of essential foodstuffs and basic consumer goods, housing and utilities services, communications and telecoms. After the bowl of the crisis passes other sectors will see a rebound like retail, group catering and transport in the second half of this year. So as ever Russia will muddle through in one piece and continue to make slow progress.
2.9 ​Russian business and consumer confidence
Due to the effects of the coronavirus (COVID-19) epidemic Russian businesses are as pessimistic as they were in 2015, ​at the introduction of international sanctions in retaliation for Crimea's annexation, RBC business daily reported on April 29 citing a survey of CFOs by Deloitte. The study shows that 37% of Russian CFOs expect their revenues to decline in 2020, while 40% see a shrinking bottom line, versus 12% and 19% respectively in the previous survey.
The top 3 risks as seen by the CFOs are ruble devaluation (80%), lower revenues from core activities (78%) and lower demand (78%). ​At the same time, 54% of the respondents envisage a prolonged recession of up to 18 months. The sectors least touched by the crisis are IT, telecommunication and media, in which 75% of CFOs see revenue growth in the next 12 months, while most of the agricultural companies are continuing their operations uninterrupted.
Bankruptcies in Russia are mounting​. In 1Q20 22,400 individuals and individual entrepreneurs have been ruled as financially insolvent by Russian courts, making a 70% year-on-year surge, RBC business daily reported on April 7 citing data from the Federal bankruptcy registrar. As reported by ​bne IntelliNews​, banking and other sectors could be hit by simplified private bankruptcy procedures during the coronavirus (COVID-19) epidemic, risking a wave of defaults on loan payments, social security contributions and ​delays on utility bills​. In 2019 69,000 bankruptcy cases were approved, up by 57% y/y. For now, the spike in 1Q20 bankruptcies is following the same trend, attributed to the popularisation of the procedure and development of the legal framework.
In March, 67,000 sole proprietors closed their businesses, a 77% increase
compared to the decline experienced in March 2019. Similarly, a survey conducted by InFOM reveals that 16% of the population has already experienced a significant decline in income. An additional 19% of respondents reported that their incomes had fallen slightly. 33% expect the situation to worsen in the next month.
developed two stress tests
The government has ​
​ to evaluate the financial
sustainability of Russia’s 646 “systemically-important firms.” ​Neither
19​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com