10 June 2009 | Russia Economic Scan

10-June-2009

Russia Economic Scan

In this edition: Russian recession raises hope for reform, Medvedev tells executives Russia will rebound quickly, BRIC countries gain clout and prominence, Russia's Lukoil sells 5 bln ruble bond, Russian stocks gain investors' favour following spectacular rally.

Top headlines

CRISIS IMPACT: Russian recession raises hope for reform

• Russia's economy is mired in a deep recession, unemployment is soaring and industrial production is collapsing -- but some policymakers and economists fret that the Eurasian giant may recover too quickly. They fear long-delayed reforms to make business more competitive and the state more efficient will not happen if Russia bounces back rapidly, burying its problems once again under a gusher of oil money.
• The global financial crisis hit Russia with unexpected ferocity last year, knocking it from growth of 7 or 8% a year into a contraction of 9.5% in the first quarter of 2009 -- a bigger shock than in any other major world economy. (Guardian)

Medvedev Tells Executives Russia to Rebound Fast

• President Dmitry Medvedev says the Russian economy will rebound faster than expected. An audience of government officials and executives meeting at the weekend mainly agreed, while demurring on the shape of the recovery.
• “I expect the Russian economy, as one of these rapidly developing markets, to overcome its problems more quickly than had perhaps been expected,” Medvedev said at the St. Petersburg Economic Forum, an annual gathering in Russia’s former imperial capital that closed on June 6. (Bloomberg)

Emerging BRIC powers and the new world order

• Brazil, Russia, India and China -- the so-called BRIC group of emerging powers -- have gained clout over the past decade as their economies grew faster than those of developed countries.
• Russia is the world's second-largest oil exporter but the global financial crisis and a fall in oil prices last year triggered its worst recession in at least a decade. The economy is expected to contract by 6% in 2009 and President Dmitry Medvedev faces soaring unemployment and wage cuts that could undermine political stability, although the recent recovery in oil prices has helped. (Reuters)

Russia's LUKOIL sells 5 bln rouble bond--bookrunner

• Russian oil major LUKOIL started the placement of a 5 billion rouble ($159.9 million) bond, a spokesman for Troika Dialog, the mandated bookrunner for the deal, told Reuters on Wednesday.
• LUKOIL sees the coupon range for its first rouble-denominated bond issue since the credit crisis effectively froze the local bond market in the second half of last year, at 13.75-14.75%. The company plans to close the book June 19. (Reuters)

Investors' View of Russia Is Finally Brightening

• A recent survey of 30 European institutional investors by RBS showed that 57% expect the Russian market to outperform global markets over the next 12 months. However, only 39% said that Russian stocks are undervalued. This compares with 84% who thought this was the case in a similar RBS survey last September.
• The survey follows a spectacular rally in Russian stocks this year, which led the dollar-denominated Russian Trading System index to recover by more than 120% from its low of 498 on Jan. 23. It closed at 1105.3 on Tuesday. The ruble-denominated Micex index has gained 117% from a low of 513 on Oct. 27 and closed at 1113.83 on Tuesday. (Wall Street Journal)

Source: Russia Economic Scan