Trump could be key to boosting Russia’s fortune

A closer relationship between Russia and the US could provide economic benefits

The outlook for the Russian economy is one dividends the experts.
On one hand the recent rise in the price of oil and recovery in Russia’s currency could point to a positive year ahead. Unfortunately the country is still dogged with political concerns, sanctions and an economic base that is not particularly diversified across many sectors.

This split continues if you look at some of the recent economic data. The Russian stock market was last year one of the best performers on a global basis, up more than 45% when calculated in US dollar terms.

That paints a different picture to the wider health of the nation as Russia emerges from a two year recession. Even the most optimistic of forecasters are only expecting annual economic growth of around 1% to 1.5% in the years ahead. That puts Russia behind the likes of the US and EU.

WHAT WILL GET THE ECONOMY MOVING FASTER?

The biggest push to stimulate the economy could come from the top; with political moves to reduce bureaucracy and improve efficiency in state-owned industries. This would be expected to have the knock-on effect of encouraging investment from international companies, something they would appear to have been reluctant to do in recent years due to the economic uncertainty.

Staying with the political theme, it remains to be seen how the US/Russia relationship is going to change now Donald Trump is the President. A better relationship between the two countries is another factor that could see more international investment and possibly open up other markets and avenues of finance to Russian companies.

Any reduction of the sanctions imposed against the country following its annexation of the Crimea would also provide a fillip to economic performance. In addition, a trade war between the US and China could see Russia become a useful ally to the former and it would be expected to benefit economically in the medium term.

TIME TO BE MORE POSITIVE TOWARDS RUSSIA?

Those are quite a few unknowns to put it mildly. The impact of political decisions in the UK, Europe and the US are a major factor in economic forecasts at the moment and there is not much clarity.

Plenty of shorter-term forecasts have proved to be wrong. The more aggressive investor may take an optimistic view that the worst is behind Russia.

In light of the recession over the last couple of years, sitting on the sidelines to see how the Trump/Putin relationship develops – or doesn’t – is probably the wiser move for now. (DJ)

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