the economy is showing signs of development, with capital flight falling from around £2bn a month two years ago to £500m at present
Russia is showing signs of greater economic development and should reward long-term investors, according to investment firm Renaissance Capital.
Stephen Jennings, president and chief executive officer of the group, which was set up in 1995, believes economic growth in the country is being driven by re-investment in the economy. He said capital flight out of Russia has fallen from around $2bn a month two years ago to around $500m a month at present.
Russia's foreign debt as a percentage of GDP has also fallen in recent years, he added, to around 40% from 80%, while the economy is seeing a rate of growth of about 6%.
As Jennings pointed out, this year marks the tenth anniversary of price liberalisation being introduced in Russia. Speaking at a Lloyd George Management conference on global and emerging markets earlier this month, he said: 'I moved to Russia because, having met many of the people there, I believed the country would see radical change. That has been the case and in the early 1990s Russia went through an unprecedented privatisation and price liberalisation period. In two years, more companies were privatised in Russia than had previously been privatised in the history of the world.
'But we should not underestimate how much change is needed to catch up with the West. For example, the judiciary needs a proper constitutional basis and rules and it takes decades rather than years to support these arrangements. The idea that gradualism is an option for Russia is nonsense. Russia is now developing a middle class and President Putin is providing stability.'
Jennings said Putin's approval rating with the Russian electorate is high and the government is addressing land, tax, social and labour reform.
Among other positive developments, he sees increasing foreign direct investment with, for example, Anglo American investing in Russian paper mills. As a signal of Russia's strengthening links with the West, Jennings also noted that Russia has been invited to join Nato.
He said: 'The question is whether the investment environment will continue to improve. Russia still has a stifling bureaucracy that imposes huge costs on small businesses and the banking system is very underdeveloped.
The finances of the Russian economy are dependent on commodity prices. The quality of the judiciary is uneven and the rule of law is not always a reality.'
Among the positives Jennings sees in Russia going forward is a possible privatisation of state-owned assets in the banking sector. He also believes Russia's bureaucracy will be streamlined and the rule of law in the country improved.
He said: 'Russia has a large current account surplus and markets will be less volatile in the future.
The biggest surprise will be the sustainability and durability of the changes. In 10 years time, we will have been surprised by the magnitude of the catch-up and
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From 6 April 2019