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4 июня 2018 г.

A panel of industry experts offered their views on the future of the Russian and global economies during the annual Forecast Dinner. The event was hosted by CFA Association Russia and gathered over 140 guests at the Holiday INN Lesnaya Hotel on May 29.

Presentations touched upon a range of different topics, including possible economic scenarios up to 2025, the future of financial markets, and the increasing economic ties between Russia and China.

This year, CFA Russia invited six guest speakers to its annual Forecast Dinner:

- Dmitry Ryabykh, CFA, President of CFA Association Russia

- Sitao Xu, Chief Economist and Partner at Deloitte China

- Yakov Mirkin, PhD, Head of the Department of International Capital Markets at the Institute of World Economy and International Relations of the Russian Academy of Sciences (IMEMO)

- Konstantin Korischenko, the former deputy chairman of the Central Bank of Russia (CBR)

- Elena Jouronova, CFA, Senior Analyst at J.P. Morgan Equity Research

- Denis Solovyov, Chairman of the investment company Zerich

Following a short opening remark Vladimir Tutkevich, the executive director of CFA Russia, who was also a moderator during the event, started off the official part of the dinner and invited the first speaker to the floor.

Disclaimer: the views and opinions expressed during the 2018 Forecast Dinner are those of the speakers and do not necessarily reflect the position of CFA Association Russia.

Dmitry Ryabykh, CFA: Looking Outside of the Stock Exchange

The first speaker, Dmitry Ryabykh, the CEO of Alt-Invest Group and President of CFA Association Russia, said the Russian economy is currently experiencing a deficit in low-tech industries, such as the production of industrial materials.

“This field will bring best investment returns,” Ryabykh said.

Realizing the need for industrial materials and a more robust agricultural sector, the Russian government has been steadily financing low-tech industries. At the same time, the role of state-owned banks in long-term loans is at 81 percent with Sberbank and VTB leading the pack with 37.2 percent and 17 percent, respectively.

That is why to have a future economic growth businesses “should try to get into the stream of government financing” and invest into the low-tech industries. In this field Russian businesses would have a comparative advantage, such as the low cost of labor and logistical benefits over their competitors in Eastern Europe, Dmitry said. 

Sitao Xu: China’s Transformation and its Future Role in the Russian Economy

The only foreign guest speaker of this year’s Forecast Dinner, Sitao Xu, took the floor next. As a high-level expert in the Chinese economy, Sitao focused on his country’s macroeconomic policies and China’s increasing trade with Russia.

“China’s energy demand will keep growing,” Sitao said. He added that although China has a significant amount of coal it’s  “dirty energy”. Considering the amount of pollution in China and the government’s push for the use of clean energy sources, such as LNG, the gas exports from Russia will increase, the speaker explained.

“Russia is very important for China,” said the speaker, adding that Russia will become China’s long-term economic partner.

According to the chief economist of Deloitte China, with the completion of the Power of Siberia pipeline in 2019, which will transport natural gas from Siberia to China, the import of LNG would increase to 38 billion cubic meters over the next 30 years.

Yakov Mirkin: Possible Economic Scenarios for 2018 - 2025

Dr. Yakov Mirkin gave a long and thorough presentation on a few possible economic scenarios that could take place in Russia over the next 7 years. Having carefully analyzed the current economic situation in the country, Dr. Mirkin predicted that most likely the Russian economy would experience a long-term recession in the future.

Currently, “the Russian economy looks similar to Latin American economies, in particular Brazil,” Mirkin said. The Russian ruble and the Brazilian real have been acting in a similar fashion over the past 20 years and this trend will probably continue, the speaker explained.

Out of five different scenarios, Russia will experience the “frozen economy” scenario with the likelihood of 45-50 percent. It will be an isolated and stagnating economy with rapidly deteriorating technologies. “From Brazil we will downgrade to Columbia,”the expert said.

Foreign investments will be “frozen” with the rest of world gradually reducing its dependence from Russian raw materials, Dr. Mirkin argued. Russia will be trading raw materials for technology and consumer goods and “become China’s the backyard.”

Konstantin Korischenko: From Where to Expect Crisis?

Korischenko, a former deputy head of the Russian central bank, began his presentation on a more global scale and looked at the current situation with interest rates and public debt in the United States. With Washington currently taking on record amounts of debt to pay for increasing spending and rising interest rates the United States, the world’s largest economy, will soon see a recession within the next couple of years.

The speaker then turned his attention to Russia. Most people blame low energy prices for the deficit in the Russian federal budget; however, according to Korischenko, the negative tendency began long before the prices dropped in 2014.

Over the past 15 years, “the Russian government has been consistently spending more than it received from oil exports.” Therefore, a budget crisis was meant to happen regardless of oil prices. The above $100 per barrel prices during 2011 and 2014 only delayed the eventual crisis, the former Central Banker said.

In his prediction, Korischenko agreed with the previous speaker: “We’ll have quite a long economic ‘freeze’… a very slow growth at best.”

Elena Jouronova, CFA: the Future of Russian Food Retail

JP Morgan’s senior equity analyst, Elena Jouronova, CFA, focused on the future of food retailers. Faithful to her company’s compliance policies, Elena didn’t give predictions and instead focused on current tendencies developing within the food industry.

According to the speaker, food retail sales in Russia should grow on average by 0.6 percent in real terms in 2018 – 2025E.

The industry is currently dominated by the three large companies, X5 Group, Magnit, and Lenta. It is expected that these three companies would continue to increase their store networks and market shares. At the same time, however, the increasing number of retail stores will probably result in a decline of sales densities and eventually EBITDA margins and returns on investment. This, in turn, would likely cause more active consolidation efforts among the top food retailers, Jouronova said.

To lighten up the air of pessimism, which was beginning to set following the previous presentations, Elena finished her speech with the famous quote from Francois Guizot: “The world belongs to optimists; the pessimists are only spectators.”

Denis Solovyov: Current Trends in Financial Markets

The chairman of Zerich, one of Russia’s leading brokerage firms, gave his perspective on how the future may unfold for financial markets. Denis Solovyov agreed with the previous speaker, Dr. Mirkin, who compared Russia to Brazil; however, he added that the Russian economy isn’t fundamentally different from other resource economies, such as Columbia and the United Arab Emirates.

“Over the past 8 years, the currencies of emerging economies have steadily depreciated against the US dollar. Russia is also on this trend, there is nothing unusual about our economy” Solovyov said.

If in terms of its economy Russia isn’t different from other emerging nations, there is a different situation politically. According to Solovyov, western anti-Russian sanctions will result in lower rates of foreign investment, the devaluation of the ruble, and a subsequent economic slowdown.

Overall, it’s a worrying sign for the economy; however, the market instability opens up new investment opportunities for traders, especially for those willing to speculate and make high-risk investments, the speaker concluded.

CFA Association Russia would like to thank Zerich for sponsoring the event. Pictures from Forecast Dinner can be found here


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