Presentation of the Online Monitoring of the Economic Situation for the Mass Media

On April 2, 2019, experts of the Gaidar Institute took part in the press conference where the April issue of the Online Monitoring of the Economic Situation in Russia was presented.
The participants in the press conference held at the venue of the TASS news agency were Vladimir Mau, Rector of the RANEPA, as well as authors of the studies published in the Monitoring : Alexander Knobel, Head of the International Trade Department, the Gaidar Institute and Mikhail Khromov, Head of the Financial Studies Department, the Gaidar Institute.
Alexander Knobel touched upon the main aspects of the article dealing with the results of the Russian foreign trade in 2018. If exports increased by 36% last year, imports saw slight growth of about 5%. That index was registered in H1, while in H2 the volume of imports started to fall. As a result, the net balance amounted to its record level of $115bn in absolute terms, while the balance of trade, to $60bn.  

The expert called this situation quite unique because the improvement of trade conditions and growth in exports normally led to an increase in export revenues and appreciation of the rouble and, consequently, growth in imports. However, with growth in revenues last year no appreciation of the national currency was observed: the expectations of sanctions exerted pressure on the rouble and growth in exports was not accompanied by growth in imports as it used to happen before.

“As a result, the net budget surplus attained the values above the expected ones.  On the back of growth in export revenues and stabilization of the exchange rate, Russia’s revenues increased, while the government’s obligations did not virtually change because they were denominated in the national currency. So, it can be asserted that the by-effect of the pressure caused by sanctions was the redistribution of resources in favor of the state, the elite and the ruling class”, said A. Knobel. Also, the expert noted that the sanctions produced quite the opposite effect than their initiators had expected.

Also, the expert stressed that changes had taken place in the geographic pattern of the trade turnover – the relations with long-term partners started to recover. “For the first time, the share of the EU in the trade turnover has increased, while the share of Ukraine has stabilized; the growth rates of the trade turnover with Ukraine have surpassed those with all the EEU member-states”, A. Knobel said. Growth in trade with China was proceeding at advanced rates, A. Knobel added.  

As regards the  non-oil and gas exports,  in 2018  their growth was ahead the schedule  (in the RF President’s May 2018 Decree the objective was set to increase the non-oil and gas exports to $250bn by 2024), however, it was mainly facilitated by the pricing environment. The risks started to materialize in January-February 2019 because prices of some baseline goods depreciated and this situation resulted in a drop in growth rates of the non-oil and gas exports.  

To stabilize the non-oil and gas exports, it is necessary to build up production and increase the volume of export supplies and diversify the economy by means of advanced conversion products – at present non-oil and gas products represent low-processed commodities which are very similar to primary products, A Knobel said.

Mikhail Khromov touched upon the last year’s results on the corporate lending market.  Mikhail Khromov pointed out that the market was rapidly recovering (enterprises’ debt to banks increased by Rb 2.3 trillion), which factor is the evidence of exit from the crisis. During the stagnation, bank lending normally shrinks and bonds are mainly in demand: based on the results of 2017, bond issues accounted for nearly a quarter of the corporate sector’s debt.

But in 2018, bank loans regained their leading role in formation of the corporate sector’s borrowed resources.   However, growth of the bond market virtually stopped, the expert said.  The banking sector takes advantage of this situation, while the financial system as a whole does not.  According to Mikhail Khromov, in Russia the system of borrowings has always been distorted towards the banking sector and for this reason other instruments were at the fledging stage.

In addition, another distortion has emerged on the corporate lending market whose growth was facilitated mainly by large companies’ borrowings. The volume of lending to small businesses has not grown since 2014 and the pattern of bank lending has shifted more and more in favor of large customers in the past few years, Mikhail Khromov said.  “It appears that our financial system is still interested in making loans to large borrowers “, Mikhail Khromov said.

According to Mikhail Khromov, the trend of shifting of corporate lending in favor of the big business can be explained by the fact that banks are afraid of extending loans to small businesses because the share of the latter’s loan default is much higher, so the quality of the credit portfolio is affected. At present, with interest rates on loans being reduced this issue has become particularly topical:  small businesses are not interested in expensive loans, while banks take no interest in inexpensive loans. “It is a disadvantage for the economy as a whole. The small business on which great expectations are placed is virtually left without the banking sector’s support”, the expert summed up with regret.