Lifting sanctions will not help the Russian economy

Economic growth in Russia is unlikely to accelerate even after the lifting of Western sanctions. The main constraining factors are internal problems, not external pressure, according to experts from the Analytical Credit Rating Agency (ACRA). The sanctions had only an indirect impact on the Russian economy, reflected in the change in the economic policy of the authorities.

Details

• There was no direct impact of the sanctions on the situation of business in Russia: the decrease in profitability of non-financial sector companies that fell under the sanctions (by 1.6 p.p. in the two years after the sanctions) was associated with a tax maneuver in the oil and gas industry, and a decrease in profitability in the banking sector (by 0.8 percentage points) affected all banks, and not just those that fell under sanctions. The share of ruble borrowings increased from 13% to 41% and bonds from companies and banks (from 40% to 66%). Business (not only subject to restrictions) began to borrow less abroad, and if it decides to borrow from a foreign lender, then they are more often Chinese banks, rather than American or European ones.
• "More significant" experts call the indirect impact of sanctions on the Russian economy, which affected the economic policy of the authorities. As an example, ACRA cites the introduction of trade restrictions on foreign imports, due to which prices for a number of goods increased and real incomes of the population fell (by 2-3 percentage points). Even the growth in the agro-industrial sector could not compensate for the negative effect of countermeasures. The change in economic policy was also reflected in more conservative budget planning and the authorities' distrust of foreign borrowing.
• Sanctions have a strong impact on long-term GDP growth, experts say. Due to restrictions, joint technological projects for the development of oil fields are already being curtailed, aluminum exports are declining (in particular, due to sanctions against UC Rusal) and oil and gas production.
• The main deterrent to economic growth in Russia in the medium term (may be 1.5% in annual terms), analysts call the shortage of labor resources. Raiffeisenbank's macroanalyst Stanislav Murashov partially disagrees with ACRA's conclusions. In his opinion, the main problem of the economy is not the shortage of labor resources, but the high share of the public sector and inefficient government spending, the negative effect of which is added by the pension reform and the increase in VAT.

Context

• The Ministry of Economic Development has already lowered its forecast for GDP growth for the next couple of years - from the previously expected 2.1% to 1.9% in 2018 and from 2.2% to 1.4% in 2019.
• will also be minimal The impact on the Russian economy from the 2018 World Cup . The effect of the World Cup on the Russian economy will be limited, "even less than the Sochi Olympics," concluded Moody's . It estimated the total increase in Russia's GDP at the expense of the championship at 150-210 billion rubles a year in the next 5 years, and the increase in GRP of each of the 11 regions where matches are held at 1-3%.

Liana Faizova