Russian Privatizations: The Line-Up is Announced

In September First Deputy Prime Minister Igor Shuvalov announced that Russia would resume privatizing assets in order to fill looming gaps in the country’s budget. On Monday November 24 the government released a list of the 14 most attractive assets it hopes to sell off in 2010.

In addition to the 14 named companies, which hail primarily from the infrastructure sector, there are 435 smaller companies that would collectively account for less than a third of the total proceeds the government hopes to raise. According to The Moscow Times, the government’s target figure for next year’s tranche of privatizations is 77 billion rubles ($2.7 billion).

This announcement comes at a time in which state corporations are coming under increasing scrutiny for lack of accountability and corporate responsibility. Earlier in November, Prosecutor General Yury Chaika presented a scathing analysis of Russian state corporations, citing misuse of state funds, wrongful disposal of property, unsanctioned bonuses and absent supervisors. As a result of the prosecutor’s investigation 22 criminal cases have been opened in connection with the activities of state corporations.  As Dmitry Medvedev continues to push for economic modernization - a major theme of his State of the Nation address on November 12 - there is hope in the presidential camp that the privatizations will help raise standards at these companies, in addition to helping bridge the fiscal gap.

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Do Russia’s Q2 GDP Figures Show Light at the End of the Tunnel?

When is a fall of 10.9% in GDP year-on-year good news? Perhaps when it represents a growth of 7.5% on the previous quarter.

The Russian economy has had a rough year, but information released on August 11 by Russia’s state statistics agency indicates that things may be levelling off.

According to the second quarter data, Russia’s GDP fell by 10.9% year-on-year but grew by 7.5% compared to Q1 09. But while the figures are giving rises to some cautious optimism, the emphasis is definitely on the word “cautious.” Yulia Tseplayeva, Chief Economist at Bank of America-Merrill Lynch in Russia, told The New York Times that “it is very likely that Russia has bottomed out and that recovery has started.” But at the end of June, the Russian government downgraded its overall GDP forecast for the year to predict an 8.5% decline, and unemployment and wage arrears remain major issues.

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Retail Looking Grim From Where Rosstat Sits

Russia’s State Statistics Service (Rosstat) has released figure for June:

• Retail sales: down 6.5% year-on-year…but up a slight 0.2% from May
• Average monthly wage: down 5.2% year-on-year
• Disposable income: down 1% year-on-year

Not the best news (although expected).  But the Economic Development Ministry is not discouraged - it’s predicting a growth in retail sales in Q4 as things start to stabilize. Who knows what autumn will bring, but if the past months are any indication, the Ministry may be seeing green shoots through rose-colored glasses.

More GDP News: Ukraine’s Q1 Figures, and They Aren’t Pretty

Following on the Russian GDP forecast earlier this week, Ukraine has released its GDP statistics for the first quarter of 2009, revealing  a 20% decline over the three months.  Although a steep drop, it was not quite as bad as politicans had feared - President Viktor Yuschenko had predicted a 25-30% drop in April.  It’s certainly not a time for rejoicing, however: it’s the worst Q1 contraction of any country in Central & Eastern Europe for the period.

Ukraine’s GDP figures were released during a visit from the IMF, which is deciding about releasing the third tranche of the $16 billion it has promised.  So watch this space - with economic indicators like these (and questions over gas payments to Russia), Ukranie certainly needs that next $3 billion sooner rather than later.

Russia’s GDP Forecast: Yet Another Downgrade

Russia’s Economic Development Ministry has revised its GDP forecast yet again, and the outlook is getting worse.  The government is now predicting an 8.5% fall in GDP - down from the 8% and earlier 6% forecasts it had previously issued.

International organizations are also issuing downgrades, although they are slightly less pessimistic than the Ministry seems to be.  The World Bank has revised its forecast to 7.9% from 4.5%, and the OECD has revised to 6.8% from 5.6%.

Customs Union Update: Russia’s Average Tariff Burden Could Fall Under New Union

Details continue to trickle out regarding plans for the Russia-Kazakhstan-Belarus Customs Union Vladimir Putin announced on June 9 (see Amanda Lahan’s CrisisCrunch post of June 10). On June 16, Andrei Slepnev, Russia’s Deputy Minister of Economic Development, announced that, as a result of the Customs Union, Russia’s “average customs rate will drop a little, but on the whole it will be acceptable.”

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A Rallying Ruble

Last autumn the wisdom of Russia’s managed devaluation was almost unanimously questioned by economists.  But a few months on the approach seems to have paid off - on Wednesday the ruble reached a four month high of 31.9328 per dollar, gaining 13% since January and avoiding a sharp devaluation that would have spooked the population with memories of the 1998 crash.

Russia’s Central Bank (CBR) is optimistic that this upward trend will continue.  In an interview with Bloomberg, CBR First Deputy Chairman Alexei Ulyukayev predicted that the ruble will gain more than 6% this year against the dollar-euro basket used to manage its swings. Sergei Shvetsov, Head of Financial Market Operations at the CBR, added that the ruble will be bolstered through the end of the year because Russians will start selling the foreign currency they have been hoarding since the start of the crisis - a whopping $70 billion.

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Celebrating Another Victory: IMF Approves Second Loan Tranche for Ukraine

Netherlands Leads FDI in Kazakhstan in 2008

The National Bank of Kazakhstan has released 2008 data on foreign direct investment in Kazakhstan.  In total, FDI increased 7.3% from 2007 to reach $19.8bn. Read more »

Kazakh Government Tightens Its Belt

Last week Prime Minister Karim Masimov announced a government hiring moratorium.  9,000 vacancies in the civil service will not be filled, and that there will be massive layoffs at state-owned Kazakh companies.

State holding Samruk-Kazyna will reduce staff by 50%, with further average pay cuts of 30%.  Staff at Samruk subsidiary companies face 15% cuts in wages.  Major companies affected include KazMunaiGas (London-listed oil and gas company), Air Astana (national airline), Kazakhstan Temir Zholy (railway monopoly), Kazpost (postal service) and Kazatomprom (nuclear power company).

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Putin’s First Annual Address to the State Duma

Yesterday Vladimir Putin delivered his first annual address to the Duma as Prime Minister.

Key Take-Aways

• 3 trillion ruble ($90 billion) aid package to ensure Russia survives a “very difficult 2009.”
• Inflation will soon begin to fall from the current annual rate of 14%.
• Tax burden should be kept low during the crisis.
• Government will reject calls to freeze electricity, gas and rail tariffs.
• Russian companies should take responsibility for reducing their own debt burden rather than relying on the state for bailouts ($174 billion of corporate debt had been repaid or restructured over the past few months).

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Have It Your Way / Ешь, что хочешь - Burger King in Russia

Fast food chain Burger King plans to break into the Russian market. According to Kommersant, the fast food chain has started recruiting with an eye toward opening its first restaurant by 2010. Burger King has been making noises about entering Russia since about 2003, but things took a more serious turn in the summer of 2008, when CEO John Chidsey said he hoped to launch in both Russia and India within 4 years. Read more »

February Statistics on Industrial Output Released

Kazakhstan: Statistical Agency announced a 4.7% overall decrease year on year

Russia: State Statistics Service announced a 13.2% overall decrease year on year

Ukraine: State Statistics Committee announced a 31.6% overall decrease year on year

From Rich List to Indebted List

Business magazine Forbes released its 2009 list of billionaires this week - and they are on average 23% poorer  than they were last year.  Forbes identified 793 billionaires this year, down from 1,125 in 2008, with an average net worth of (only!) $3bn.

Previous Forbes lists have been littered with notoriously wealthy Russian oligarchs.  But with the stock market declines since last autumn - and the high-profile margin calls on key assets - it has slowly emerged that Russia’s wealthiest don’t quite hit the gold standard.  With an estimated $500bn in total Russian corporate debt, these Russian tycoons have clearly shifted from having billions to owing millions.  Needless to say, however, they’re not missing any meals.

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Ukraine’s IMF Bailout

Toward the end of 2008 Ukraine secured a $16.4 billion bailout from the IMF to shore up its economy, and in November received the first tranche, amounting to $4.5bn.  Under the terms of the loan agreement, Ukraine agreed to rein in spending and approve a balanced budget.  However, shortly after the first tranche was received, Ukraine approved a budget with a deficit of 5% of GDP.  The IMF cautioned the Ukrainian government that this violation jeopardized the second tranche of $1.9bn. Read more »

Kazakhstan’s Reserves - February Figures

The National Bank of Kazakhstan released the February figures for its international reserves and National Oil Fund.

International reserves rose 7.6% from January 2009 to $19.6bn.  The National Oil Fund fell 20.2% from January to $22.3bn.

On Friday Nursultan Nazarbayev, Kazakhstan’s president, announced that $4bn from the National Oil Fund would be used toward the country’s larger $21bn economic stimulus plan.

Tenge Devaluation: One Month On

On February 4, Kazakhstan’s National Bank dramatically devalued the tenge from a corridor of 117-123 tenge/US dollar to 145-155 tenge/US dollar, citing the decline in oil price (oil comprises 60% of Kazakh exports); currency devaluations in Kazakhstan’s neighbors, particularly Russia; and the fledgling state of the domestic banking sector. The sudden devaluation was unexpected - the general sense in the financial community was that it wouldn’t happen until March or April, and even then it would be an incremental devaluation throughout 2009. Read more »

Russia’s IPO Market: What the Experts Think

PBN had an impressive array of investment bankers and capital markets experts at its launch today of IPO Pioneers 4, which was held at the Institute of Contemporary Development, a Moscow-based think tank.  Here are some of their predictions and insights about capital market activities in Russia, Ukraine and the CIS: Read more »

Russia’s SWFs - February Figures

Russia’s Finance Ministry released the February figures on the country’s sovereign wealth funds yesterday. Read more »

From $95 Oil to $41 Oil - Russia’s Revised Budget

Finance Minister Alexei Kudrin previewed Russia’s revised 2009 budget yesterday.  The original 2009 budget was based on an oil price of $95 per barrel and projects a surplus of 1.9 trillion rubles ($54 billion).  The new budget is based on $41 oil and projects a deficit of 8% of GDP.  Kudrin said that Russia’s Reserve Fund and National Welfare Fund will provide up to 2.7 trillion and 255 billion rubles, respectively, to help make up the deficit. Read more »