Russia 100203 Basic Political Developments
RIA: Foreign direct investment in Russia 'to hit -70 bln by 2013'
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RIA: Foreign direct investment in Russia 'to hit $60-70 bln by 2013'http://en.rian.ru/russia/20100203/157758923.html 09:5703/02/2010 Russia could see a pre-economic crisis level of foreign direct investment of $60 billion to $70 billion by 2013, Finance Minister Alexei Kudrin forecast on Wednesday. He said foreign direct investment stood at $70 billion before economic recession swept the country in 2008, reducing the figure to $30 billion. He also said Russia saw capital outflow of $52 billion in 2009. "In the next two to three years we will have foreign direct investment back at $60 billion - $70 billion," Kudrin said. The government press service reported on Tuesday that the inflow of foreign investment into Russia exceeded $40 billion last year. MOSCOW, February 3 (RIA Novosti) Bloomberg UTV: Economic Buzz: Foreign investment Inflows In Russia Increases In 2009 http://www.bloombergutv.com/stock-market/commodities-market/commentary/371473/economic-buzz--foreign-investment-inflows-in-russia-increases-in-2009.html Published on 3rd February, 2010 11:33:00 During the last year the foreign investment inflows in Russia increased by $ 40 billion, as per the latest data from Russian government. It also said foreign investment in Russia was $35 billion in the first nine months of 2009. Russian President Dmitry Medvedev said earlier on Tuesday capital investment in the Russian economy decreased 41% last year and urged the government to work out measures to attract investment as the global economy continued to recover from recession.
By Paul Abelsky Feb. 3 (Bloomberg) -- Russia’s government in the “next few days” will select the banks it will hire to manage the country’s first international bond sale in more than a decade, Finance Minister Alexei Kudrin said today. Russia plans to sell as much as $17.8 billion of bonds this year to help plug its budget gap and named 22 banks to its shortlist for the sales on Dec. 24. Last Updated: February 3, 2010 01:32 EST Bloomberg: Russian Service Industries Expanded at Slower Pace in January http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a2yUxxNBOo08 By Alex Nicholson and Lucian Kim Feb. 3 (Bloomberg) -- Russian service industries ranging from banks to restaurants grew at a slower pace in January than the month before as new business shrank, VTB Capital said. The Purchasing Managers’ Index slipped to 51.9 from 53.4 in December, VTB Capital, the investment bank of Russia’s second- biggest lender, said in an e-mailed statement today. A reading above 50 indicates expansion. The historic average is 56.8, the bank said. “The incoming new business index pointed to a moderate contraction for the first time since July 2009, while business activity continued to grow,” VTB analyst Svetlana Aslanova said in the statement. Gains in consumer spending may help Russia extend an economic recovery that began in the third quarter last year. Retail sales fell by 3.6 percent in December, the slowest pace since March, as consumer confidence rose and the stabilizing currency and easing inflation boosted household spending. At the same time, signs of growth remain “fragile” Deputy Economy Minister Andrei Klepach told reporters yesterday. So far, growth has come from companies restocking inventories rather than a firm revival in consumer demand, he said. OAO Seventh Continent, a Russian food retailer, said it plans to open 14 outlets this year as sales increase, including three superstores. Moscow-based Seventh Continent said on Feb. 1 that December sales rose 17 percent from the same month a year earlier to 5.66 billion rubles ($186 million). To contact the reporter on this story: Alex Nicholson in Moscow at anicholson6@bloomberg.net; Lucian Kim in Moscow at lkim3@bloomberg.net
Published: February 2 2010 22:41 | Last updated: February 2 2010 22:41 The Kremlin has ordered Russian companies rescued by state bail-outs during the financial crisis to help modernise the economy and reduce reliance on oil and gas exports. Dmitry Medvedev, the Russian president said on Tuesday that the “government had the right” to count on companies that received state bail-outs in 2008 to invest in the modernisation of the economy and not to “continue the policy of increasing natural resource exports”. “For now they are sleeping,” he told a government meeting called to discuss the problems of Russia’s investment climate. Russian natural resource companies flourished while international credit was cheap, borrowing heavily to fund runaway growth. But the tide turned after the global financial crisis erupted and world commodities prices plunged. The government channelled more than $50bn through VEB, the state bank, to finance the external debts of Russian companies in late 2008 to prevent stakes in strategic industries from falling into foreign banks’ hands. UC Rusal, the aluminium company run by Oleg Deripaska and Evraz, the steel group, were major recipients of the funds. Although the bail-outs were suspended a year ago, the government has put pressure on VEB, the state bank to roll over loans and on other banks not to call in loans. The Kremlin has portrayed the crisis as an opportunity for Russia to introduce innovative industries to lessen its dependence on oil, gas and metals exports that were the engine of economic growth before the crisis. Analysts have warned that as commodities prices rise, driving a recovery in the Russian economy, business people will have no incentive to invest in innovation. Speaking at the government meeting on Tuesday, Arkady Dvorkovich, adviser to Mr Medvedev, said the economy grew by more than 3 per cent in the last quarter of 2009, signalling that a recovery was under way. Russia’s state statistical service said on Monday that the gross domestic product fell by 7.9 per cent in 2009, the first annual contraction in more than a decade. Mr Medvedev said total capital investment in the economy plunged by 17 per cent in real terms in 2009. Foreign direct investment in Russia fell by 41 per cent last year to about $40bn, the government said . Upstreamonline: Russia oil fund down on transfershttp://www.upstreamonline.com/live/article205135.ece Russia's two oil wealth funds declined by a total $1.54 billion over the last month, falling to $150.54 billion, as more funds were transferred to aid federal budget shortfalls, the Finance Ministry said today. News wires Tuesday, 02 February, 2010, 12:28 GMT The Reserve Fund, designated for plugging holes in federal budget, is currently worth 1.823 trillion roubles ($59.91 billion), a decrease of 7.25 billion in rouble terms and $610 million in dollar terms, the ministry said in a statement. In the whole of 2009, the Reserve Fund fell 3.1 trillion roubles, with the Finance Ministry transferring 2.96 trillion into the federal budget as anti-crisis measures and 179.4 million to oil and gas transfers. The Reserve Fund is expected to run out by the end of 2010. Any additional oil windfall revenue that might come this year will be transferred directly to the federal budget. The second outlet for Russia's oil revenues, the National Wealth Fund fell to 2.76 trillion roubles, as of 1 February from 2.77 trillion roubles, a month earlier. In the whole of 2009, however, the Fund rose by 184 billion roubles, the ministry said. Published: 02 February 2010 12:28 GMT | Last updated: 02 February 2010 12:39 GMT
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Yesterday (2 Feb), Russia's Ministry of Finance published Reserve Fund (RF) and National Welfare Fund (NWF) performance statistics for January. These indicate that, at 1 Feb, the RF stood at RUB1.82trn ($59.9bn) and the NWF at RUB2.76trn ($90bn). Last year, RUB2.96trn was transferred from the RF to the federal budget, in order to cover the budget and RUB180bn was used to execute the annual oil and gas transfer in full. The NWF deposited RUB434bn and $2bn to Vnesheconombank (VEB), aimed, respectively, at subordinated lending to commercial banks and to support the financial market. The Ministry of Finance received annual income from the management of the two funds in January. Income from the RF amounted to RUB52bn and was transferred directly to the federal budget. At the end of 2008, the Ministry of Finance placed a deposit from the NWF with VEB aimed at financial market support (in particular, the purchase of Russian securities in the open market). Nevertheless, at the end of 2009, the Ministry of Finance decided to leave income from these operations with VEB, while the NWF received interest from the deposited funds. Therefore, the NWF's annual income accounted for only RUB71bn: around RUB26bn of which was left in the fund, with the federal budget receiving RUB47bn. Despite an increased pension burden, the Ministry of Finance has not transferred any funds to the federal budget since the start of the year. The budget received one-off income this month from fund management, and its expenditures may have been lower than usual as a result of the long New Year holiday. Accordingly, we think the budget deficit (if there is one) could be covered from the funds in federal budget accounts. Nevertheless, starting from February we think the Ministry of Finance will continue covering the budget gap using the RF.
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Event: Yesterday (2 Feb) Reuters published key points of an interview with Central Bank of Russia (CBR) First Deputy Chairman Gennady Melikyan. Our takeaways are: According to preliminary data (including Sberbank), Russian banking system corporate loans increased 0.3% YoY in 2009, while retail loans dropped 11% in the same period. The CBR expects the sector loan book, which contracted 1.3% YoY in 2009, to begin growing by 1H10 as a result of the improved financial position of corporate clients and lower loan interest rates. Sector retail NPLs stayed flat MoM in December, accounting for 6.8% of average credit, while corporate NPLs moderately decreased 10 bpts to 6.1% as of 1 Jan 2010. According to Melikyan, the banking system accumulated sufficient loan loss provisions through the crisis. Action: Neutral for the sector, in our view. Rationale: Based on the announced preliminary data, the sector loan portfolio trend in December was in line with what we have seen in the previous months and the stagnant asset quality growth is welcome news. Russian banks showed healthy deposit intakes in 2009 and are now focused on reducing the cost of funding which, in our view, should be supportive for the resumption of lending growth, as banks will gradually cut lending rates, making loans more affordable to companies.
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