russia 2015: the year of change · russian vs chinese gdp in usd terms faster russian growth before...

RUSSIA 2015:

THE YEAR OF CHANGE

Andrei AkopianManaging Partner

CADERUS CAPITAL

April 2015

Russian GDP

Negative growth in 2015

Source: Russian Statistics Agency, Caderus research

Russian GDP in USD bn and USD-terms growth %, rhs

2© April 2015. Caderus Capital

Descending from 8th place in 2012-13 to 10th place in 2014 due to RUB depreciation

2015 GDP real growth forecast: IMF -3.8%; World Bank -2.9%; Min Econ -3%

260306

345431

591

763

992

1,302

1,658

1,221

1,490

1,867

2,0152,090

1,845

33%

18%

13%

25%

37%

29% 30% 31%

27%

-26%

22%

25%

8%

4%

-12%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

0

500

1,000

1,500

2,000

2,500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

17,416

10,355

4,770

3,820

2,902

2,848

2,244

2,129

2,048

1,845

1,794

1,483

1,449

1,400

1,296

880

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

US

China

Japan

Germany

France

UK

Brazil

Italy

India

Russia

Canada

Australia

South Korea

Spain

Mexico

Netherlands

Russian vs Chinese GDP in USD terms

Faster Russian growth before 2008

Russian and Chinese GDP (USD tn, aop rate), Russian GDP as % of China’s GDP in USD-terms, red line, % rhs

Source: PRC National Statistics Bureau, Russian Statistics Agency, Caderus research


1.51.6

1.92.3

2.8

3.6

4.65.0

6.1

7.5

8.3

9.3

10.3

0.30.4 0.6 0.8 1.0

1.4 1.4 1.31.5

1.7 1.9 2.0 1.8

23%

27%

32%

33%

37% 37%

31%

26%25%

23%

22% 22%

18%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

2

4

6

8

10

12

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

There is more economy than meets the eye

Shadow economy has picked up since 2008

Shadow economy is adding up to

41% more to GDP in Russia

(World Bank, 2007)

Source: World Bank 2007, Caderus research

Shadow economy as share of GDP per country, %


47

43

41

38

29

27

21

15

15

12

12

8

0 5 10 15 20 25 30 35 40 45 50

Ukraine

Belarus

Russian Federation

Kazakhstan

Turkey

Italy

India

Germany

France

United Kingdom

China

United States

GDP structure and growth drivers

Household consumption no more fuelling growth

Household consumption was 53.3% of

GDP in 2014, up from 48.6% in 2011

primarily on consumer finance growth

Share of state consumption is picking up

Fixed assets investment is expected to

decline by 13% in 2015 (Min Econ)

Net exports share of GDP is up in 2014

despite a 9.2% decline in imports and a

5.8% decline in exports

Source: Russian Statistics Agency, Caderus research


Household consumption53% Investment

20%

State consumption19%Net exports

7%

Commercial cons.1%

Inventory-0.3%

2014 GDP composition

Inflation: reversing the trendRising inflation is back to 2000-02 levels

Russian CPI and key rates turned north in 2014

Source: Central Bank of Russia, Caderus research

CPI (orange line) and CBR refinancing rate (“key rate” after 2013), %


16.7%

11.4%

6.5%

6.5%6.1%

8.8%

8.8%

13.3%

11.9%

9.0%

10.9%11.7%12.0%

15.0%

18.7%

20.1%

March 2015 (yoy)201420132012201120102009200820072006200520042003200220012000

Russian RubleStrength in 2015 after the 2014 meltdown

Key decision in 2014: ruble free float on 10 November

After having spent $29.3bn of FX res in Oct 14; $68.3bn since 1 March 2014 to year end; $2.9bn in 2015 so far

Some of the reasons for rouble appreciation in 2015:

(+26% since 69.664 trough on 3 Feb 2015)

Stabilisation of crude oil prices

Ceasefire in Ukraine

Lower demand for FC from companies and population

Oversold in 2014, reverse panic and stop-losses

Better Bank of Russia’s handling of the FC shortage

Sharp decline in imports (-36.3% in Q1 2015 yoy)

Profitable carry trade in RUB

Demand from foreign investors for RUB assets Source: Central Bank of Russia, Caderus research

RUB ǀ USD rate since Jan 2014


25

30

35

40

45

50

55

60

65

70

Jan

-14

Jan

-14

Jan

-14

Feb

-14

Feb

-14

Mar

-14

Mar

-14

Ap

r-1

4

Ap

r-1

4

May

-14

May

-14

Jun

-14

Jun

-14

Jul-

14

Jul-

14

Jul-

14

Au

g-1

4

Au

g-1

4

Sep

-14

Sep

-14

Oct

-14

Oct

-14

No

v-1

4

No

v-1

4

Dec

-14

Dec

-14

Dec

-14

Jan

-15

Jan

-15

Feb

-15

Feb

-15

Mar

-15

Mar

-15

Ap

r-1

5

Foreign currency reservesAmong the top 10 in the world

Foreign currency reserves: USD 360.8bn (Mar 15)

low: $10.7bn (2 Apr 1999); high: $598bn (8 Aug 2008)

FC reserves include $75.7bn Sovereign Reserve Fund and $74.35bn National Welfare Fund

(as at 1 April 2015)

Russian foreign currency reserves (blue) and gold reserves (orange), USD bn

Source: Central Bank of Russia, Ministry of Finance, Caderus research

8

0

100

200

300

400

500

600

700

Jan

-97

Jul-

97

Jan

-98

Jul-

98

Jan

-99

Jul-

99

Jan

-00

Jul-

00

Jan

-01

Jul-

01

Jan

-02

Jul-

02

Jan

-03

Jul-

03

Jan

-04

Jul-

04

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

© April 2015. Caderus Capital

Budget balanceA difficult year

Budget balance has been very strong before 2008, -4.9% in Q1 2015


8.1%8.4%

6.0%

4.9%

-6.3%

-3.4%

1.5%

1.0%

-1.3% -1.2%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Russian Statistics Bureau, Caderus research

Federal debt and total foreign debtThe bulk of fc debt is not directly on the state

Sovereign debt/ GDP: 14.63%

Total external debt (including private companies) to GDP: 36.8%

Russian federal internal (blue, USD bn) and foreign currency debt (orange, USD bn), total federal debt in RUB to GDP (orange line, %, rhs)



74 71

82

97

113

128 125130

146

135

144

164

154 151157

173

160

170

146

129

3642 41 40 39 37 36 36 35

42 41

51 50 5056 56 55 55 54 54

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

20

40

60

80

100

120

140

160

180

200

Q1

20

10

Q2

20

10

Q3

20

10

Q4

20

10

Q1

20

11

Q2

20

11

Q3

20

11

Q4

20

11

Q1

20

12

Q2

20

12

Q3

20

12

Q4

20

12

Q1

20

13

Q2

20

13

Q3

20

13

Q4

20

13

Q1

20

14

Q2

20

14

Q3

20

14

Q4

20

14

Foreign trade: 2015 will be very different Q1 2015: imports down 36.3%, exports down 29.6%

Export in 2014 $496.9bn (-5.8%)

Energy 73.3%

Metals and metal goods 7.9%

Chemical products 5.1%

Machines and equipment 3.7%

Food and agro products 3.2%

Timber and paper 2.1%

Import in 2014 $286.0bn (-9.2%)

Machines and equipment 50.5%

Chemical products 16.8%

Food and agro products 13.4%

Metals and metal goods 5.7%

EU share (№1) 48.2% (↓ vs 49.6% in 2013)

Asia (mainly China) 27% (↑ vs 24.8% in 2013)

Source: Federal Customs Office, Caderus research


Trade balanceThe main source of foreign currency this year

Still healthy in Q1 2015 at $40.3bn (-20% yoy)


46

60

86

116

134

123

178

113

147

197192

182190

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

50

100

150

200

250

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Central Bank of Russia, Caderus research

Russian trade surplus (USD bn), trade surplus as % of GDP, rhs

Population drives growthConsumption, savings and investment growth

Russian population dynamics turned from

negative to positive in 2011

Population growth is very concentrated in a

few regions in Russia

Population aged 15-59 (2013):

94.1 mn in Russia (+10.2% yoy)

Moscow has been the magnet for working

population from other Russian regions and

also from neighbouring countries Source: Russian Statistics Agency, Caderus research

Russian population organic growth (blue bars), net immigration (orange bars) and total growth (red line), '000s

214

72 7835 39

107132

240 242 247

158

320295 296

-959 -943 -935-889

-793-847

-687

-470

-362

-249 -241

-131 -3

23

-745

-871 -857 -853

-754 -739

-555

-1-83

189

292319

-1,000

-800

-600

-400

-200

0

200

400

-1,200

-1,000

-800

-600

-400

-200

0

200

400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013


Per capita incomeGood numbers hide uneven distribution of income

Avg salary in 2014 = 32,611 ($572, +8.8% yoy) is lower than in

China ($691 at start 2014)

Moscow is still better off at 61,357 ($1,076) vs Beijing ($938)

110 billionaires own 35% of all wealth in Russia (CS 2013)

Russian per capita income (RUB) and nominal growth yoy, % rhs


516 770 941 1,010 1,659 2,281 3,0623,947

5,1676,399

8,088

10,155

12,540

14,864

16,895

18,958

20,780

23,058

25,500

49%

22%

7%

64%

38%

34%

24%

26%

23%

19%

14%12%

10%11% 11%

0%

10%

20%

30%

40%

50%

60%

70%

0

5,000

10,000

15,000

20,000

25,000

30,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013


Thank you

CADERUS CAPITALwww.caderus.com

15

Andrei Akopian

Managing Partner

London: +442071930219

Moscow: +7917 577-6911

Hong Kong: +852 81799277

[email protected]

© April 2015. Caderus Capital

russia 2015: the year of change · russian vs chinese gdp in usd terms faster russian growth before...

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