Russian GDP is forecast to increase this year, with solid investment spending and oil prices and inc...
Russian GDP is forecast to increase this year, with solid investment spending and oil prices and increasing consumer demand and wage growth.
Dimitri Chatzoudis, portfolio manager at ABN Amro, says: 'Russia is having one of its best years in recent memory with GDP growth expected to be around 6%.
'Confidence has improved and businesses are starting to re-invest in the region. Capital expenditure looks strong, which has mainly been in resources such as oil and mining but is starting to filter through to other areas such as manufacturing.'
Christopher Fitzwilliam-Lay, marketing manager at Charlemagne Capital, believes the Russian economy will double over the next 10 years because of higher oil prices and improved efficiencies in getting oil out of the ground.
'The government has also $70bn in reserve for investment in infrastructure. This has been raised from the taxation of income from oil companies for spending on roads, railways, industries and utilities,' he says.
Positive as the overall picture seems however, Russia is not without its problems ' the divide between rich and the poor is increasing, there are concerns over inflation and the banking system is in need of development.
As ever, it is politics that provides both the biggest opportunities and the worst threats to the country's future. In particular, there are concerns over the sluggishness of President Putin's political reform programme, according to Chatzoudis.
The reform process in the housing and social sectors has been postponed until after the forthcoming elections, for example.
Fitzwilliam-Lay also points to political concerns over the power of the oil owners and whether they are using their economic strengths in an attempt to gain political power.
Year to September the Russia Traded Index has moved up from around 550 to over 900 the market has been on an upward trend since falling to 35 in October 1998.
There are also concerns over inflation. Although Chatzoudis does not consider this to be a major problem, he says one of Putin's focuses should be on bringing this down to a single-digit level.
While Chatzoudis expects investment spending to continue as firms gain confidence in the future, Fitzwilliam-Lay believes that outside the oil industry, opportunities are almost non-existent, with the exception of telecoms.
'This is because there is not an adequate fixed line telephone system outside of Russia and there has been an increase in the use of mobile phones,' he says.
'Russian firms have struggled to raise capital, because banks are not very sophisticated and do not have an adequate loan system for firms to borrow money to undertake investment spending.'
Chatzoudis says there is strong consumer demand due to wage growth and a stronger rouble, but there are regional differences within the country. In the industrialised areas, unemployment has fallen, while it is increasing in the rural areas.
'A divide has arisen between the rich and the poor. There are real concerns about inflation, people's wages and whether or not the quality of life will become an issue,' he says.
Companies looking to reinvest in Russia.
Increasing consumer demand.
Strong outlook for wage growth.
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