Russia: strengthening ambitions

THIS POST WAS ORIGINALLY PUBLISHED JULY 17, 2007

Russia: strengthening ambitions

I was amused today by derogative language that was produced by someone hiding by the name of ‘the Ruminator” – he very nicely described my blog as “the crap peddled by Kuznetsov from FINAM” . I am very flattered by this person that knew “more about investing at kindergarten” than me. I never thought about investments in my kindergarten. Maybe this is one of the Russian oligarchs in mask??? This led me to look through ‘the Ruminator” blog that is basically composed of clips of other writers with a few venom comments. Internet is very good and it offers a lot of possibilities for anonymous hidings besides fancy names (ruminator - a reflective thinker characterized by quiet contemplation - The American Heritage® Dictionary of the English Language). One thing that is eminent – if you live in Russia since 1994 – and do detest everything here – why do you stay here? Maybe it is better to leave Russia and ruminate somewhere else???

 

 

OK, Here I would like to reproduce a part of Merrill Lynch's “Russia & CIS, Global Ambitions” by Julia Tsepliaeva that is released today. Well, maybe mysterious “Ruminator” is holding some specific label for Merrill Lynch too???

Russia: strengthening ambitions

- Russia continues to deliver very solid economic data that are unlikely to deteriorate dramatically even in the event of an unexpected fall in oil prices. Domestic demand is now the main driver of growth.

- Political risks associated with the transition to a new presidency in March 2008 are the main short-term concerns. We strongly believe there will be smooth transition and we expect no major revisions to current policies.

- Steady improvements in living standards have provided the Kremlin with an open mandate, and provide for further expansion of consumption. The policy to move towards higher economic concentration and increased government control over economic activity is unlikely to change in the near future. This will cement the role of corporate giants as the foundation of the country’s
economic system.

- Strong economic performance and positive sentiment on future economic development has strengthened Russia’s ambitions to play a more influential role in both the international and CIS arenas. Periodic tensions in inter-CIS relations are likely in the coming years.

- We are optimistic about developments in the Russian financial markets. The rouble remains under strong appreciation pressure and this tendency is likely to be sustained in our view. Rouble liquidity will remain high. Debt and equity markets will continue to diversify, offering opportunities for a broad range of investors in terms of risk appetite.

Impressive economic performance. Russia is in the best economic shape it has ever been

Solid economic growth at an average 6.7% YoY for the ninth consequent year has made the 1998 crisis year a distant memory. The country is enjoying current account and fiscal surpluses, and has accumulated very substantial amounts in its reserves and in the Stabilization Fund (destination of the extra oil revenues from the budget). These reached US$405.8bn and US$120.8bn, respectively, by 1 July 2007 and will help smooth out any external shocks (Charts 1 and 2). Consequently, mid-term economic risks should be manageable.