Russian Economy Suddenly Shrinks in November

Russia’s economy unexpectedly contracted in November, hit by a drop in industrial production, the economy ministry said on Monday.

Gross domestic product shrank 0.3 percent year on year in November, the economy ministry said, contrasting with analysts’ consensus call for a 1.5 percent growth.

Russia’s oil-dependent economy was on the mend in 2017 after two years of recession, triggered by a sharp drop in global commodity prices as well as sanctions imposed by Western countries against Moscow for its role in the Ukrainian crisis.

In November, GDP was dragged down by the industrial sector where output contracted 3.6 percent compared with a year ago. The economy ministry said it blamed the weaker industrial output on the global agreement of major oil producers, including Russia, to limit crude production in order to prop up commodity prices. The ministry also said the industrial output sank because of the warm weather, which pressured demand for natural gas on either domestic and foreign markets. (more…)

China: Fruit and Veg Exports to Russia up 28% from Heilongjiang

According to the Office of Statistics, the fruit and vegetable export form Heilongjiang increased greatly in 2017. The total export volume of fruit and vegetables was 72.900 MT, with a value of 35,971,200 USD. That is an increase in export volume of 28.8% in comparison with the same period in the previous year, and an increase in value of 28.41%. This is a new high point in the history of fruit and vegetable transport from Heilongjiang port to Russia.

www.freshplaza.com

Russia Has Destroyed 19,000 MT of Food Since Import Ban

Over 19,000 tons of banned western food products have been destroyed as of Tuesday, Jan. 9, Russia’s state agriculture watchdog said in a statement published on its website. The ban was introduced in August 2014 in retaliation to Western sanctions imposed on Russia following its annexation of the Crimean peninsula. Since then, the country has destroyed hundreds of tons of fruits and vegetables, cheeses and livestock products.

Only 278 tons of the confiscated products remained untouched, Rosselkhoznadzor added.

The practice of destroying foods dates back to August 2015, a month after President Vladimir Putin ordered the physical destruction of fruits and vegetables, dairy, meat and other agricultural products imported to Russia from the blacklisted countries.

The ban has been extended until late 2018.

Meanwhile, the EU has demanded 1.4 billion euros in compensation from Russia for banned pork.

www.themoscowtimes.com

Russia’s Economic Growth Expected to Reach 1.8-2% in 2017

Russia’s economic growth in 2017 is expected to stand at 1.8 to two percent, Russian Finance Minister Anton Siluanov said on Sunday.

“This year, we expect an economic growth of 1.8%-2%,” he said in an interview with the Rossiya-24 television channel.

In mid-December, Russia’s Central Bank forecasted the country’s economic growth in 2017 at 1.7-2.2%. The Bank’s governor, Elvira Nabiullina, said back that that the forecast leaned “to the lower threshold.” In 2018, Russia’s economic growth, as predicted by the Central Bank, will be in a range from 1.5 to 2%

www.tass.com

Unanimous EU Extends Russia Sanctions

The European Union has extended the sanctions against Russia by six months. The sanctions were activated in 2014 as a response to the Russian annexation of the Crimea. Later the sanctions were linked to the carrying out of the Minsk accords, which aim for a cease fire in Eastern Ukraine. For now the country remains full of unrest.

Unlike previous extensions there was little attention paid to it in the run up. In previous years when the decision was made there was some protests from member states, national government or lower government. Donald Tusk, president of the European Commission, summed it up in a Tweet: “EU united on roll-over of economic sanctions on Russia.”

This decision has no short term consequences on the boycott of fruit and vegetables from Europe that Russia imposed as a response to the sanctions. Russia announced they would be maintaining the boycott until the end of 2018 when the sanctions were last extended. In the European Parliament last month there were parliamentarians who agreed that the EU should be doing more to tackle the consequences of the boycott. European Commissioner Hogan responded that there were enough measures in place to limit the damage of the boycott.

www.freshplaza.com

Russia Limits Import of Fruit and Vegetables from Kazakhstan

The Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor) reported on the imposition of restrictions on the import of vegetables and fruits from Kazakhstan.

According to the department, December 1-8, 2017 more than 4,000 MT of quarantined products were imported from Kazakhstan. 26 cases of violations of phytosanitary requirements were discovered.

www.tks.ru

Greenhouse Vegetables Harvest Grew by Almost 14% in Russia

As of November 28, gross harvest of greenhouse vegetables in Russia was 690,100 MT, which is 13.6% more than in the same period last year (to compare – in 2016 it was 607,100 MT) as it was reported by the press service of the Ministry of Agriculture of the Russian Federation.

450,200 MT of cucumbers were harvested (in 2016 – 409,400 MT) and 229,000 MT of tomatoes (in 2016 – 182,500 MT). The yield of other vegetable crops was 10,900 MT (in 2016 – 15,200 MT).

The leading regions in the production of greenhouse vegetables are Krasnodar region (82,000 MT), Stavropol region (61,000 MT), the Republic of Tatarstan (41,700 MT), the Republic of Bashkortostan (39,200 MT), and Lipetsk region (33,700 MT).

www.fruit-inform.com

Russian Economy Minister: Russia’s Budget Deficit not to Exceed 2% of GDP in 2017

Russia’s budget deficit will amount to around 2% of GDP or even less by the end of this year, Economic Development Minister Maksim Oreshkin said Wednesday.

“Despite oil prices falling to around $40 per barrel, budget deficit will be less than 2% (of GDP) this year,” he said.

According to Oreshkin, the country’s economy is on the rise. “What is being discussed now is the issue of economic growth. Global organizations and we expect (GDP) growth of roughly 2%,” he said.

The Russian government and the Central Bank are already implementing a number of measures aimed at reaching higher growth rates, the minister said. “Two years ago inflation was above 12% whereas today’s inflation is within the range of 2.6%,” he said.

www.tass.com

Russia’s Economy Is Growing With Borrowed Money

Without any new ideas from a technocratic government constrained by President Vladimir Putin’s apparent indifference, the Russian economy is once again relying on consumers, who are borrowing more to buy real estate and imported products. The growth is real, but it’s also meager. And it will be hard to sustain without bigger changes.

On Monday, Rosstat, Russia’s official statistics agency, announced that the country’s gross domestic product increased 1.8 percent year-over-year in the quarter than ended in September. That’s lower than Bloomberg’s consensus forecast of 1.9 percent and slower than the 2.5 percent increase in the previous three months. The oil price jumped 20 percent during the quarter, but the economic statistics won’t pick up the related growth until the fourth quarter. So far this year, the Russian consumer deserves most of the credit for the growing economy. After suffering through three tough years — during which time oil tanked and the ruble devalued sharply — they are buying things again. Unfortunately, most of the things Russians are buying aren’t made in Russia.

The stability of the ruble (it has gained about 1 percent against the U.S. dollar so far this year) and low inflation (the Bloomberg consensus forecast is for it to fall by almost half to 3.8 percent this year) have helped boost consumers even though real disposable incomes dropped throughout the quarter. Households are choosing to get more leveraged.

In 2015 and 2016, household debt went down as interest rates and bad loans shot up. By the end of 2016, some 20 percent of consumer loans were non-performing, according to the Central Bank. Banks that had issued them rolled up their programs and viewed borrowers with increased suspicion. This year, however, the Central Bank has lowered its key rate from 10 percent to 8.25 percent, and banks couldn’t resist the temptation to offer more funds to private borrowers. With mortgage rates at a historic minimum and consumer loans affordable again, Russians have some convincing reasons to warm to the idea of borrowing.

The Central Bank claims it isn’t worried because consumer borrowing has only been increasing by about 2.5 percent of the monthly retail trade turnover — not enough, by its analysts’ reckoning, to drive up inflation. Russian banks have a total mortgage portfolio of some 5.5 percent of GDP, compared to 20 percent in Poland. There are, however, signs that the Central Bank sees a bubble in the making, at least on the mortgage market. Starting this month, it has required drastically higher reserves against mortgages with a down payment below 20 percent.

Apart from the lack of income growth, which makes any debt increase risky, the Central Bank is facing another problem. In recent months, it’s had to take on two large banks — Otkritie and B&N — with a combined balance sheet hole of at least $12 billion. Private Russian banks find it difficult to compete with state behemoths Sberbank and VTB without taking on too much risk. More failures would stretch the central bank’s resources.

The state banks, hit with Western sanctions and thus deprived of the cheap Western loans that fueled the previous loan boom in the 2000s, have problems of their own: They are short of liquidity. VTB would have run into trouble in the third quarter without massive government deposits.

Russia needs better growth sources than household borrowing. The government has counted on private investment growth, which was unexpectedly robust in the second quarter. But for more investment to materialize, Russia needs to develop more export competences, the way it has done with agricultural commodities such as wheat. High oil prices have historically discouraged that sort of diversification, and crude, at more than $63 per barrel, is much more expensive than the $40 the Russian government budgeted for this year. It’s even high enough for the country to start pouring money back into its reserve funds.

Russian President Vladimir Putin has always been extraordinarily lucky. The Russian economy has returned to growth and consumers have been reassured by low inflation and a stable currency just as he prepares to run for a fourth term in office next year. But sustaining even this small level of growth for another six years without structural change will be a challenge. Putin has shown little interest in explaining how he’s going to tackle it, focusing more on the complex geopolitical game he’s been playing. Whether that game is tactical or strategic, the Russian economy is in dire need of a coherent strategy as it continues coasting along on a mixture of hope, luck, oil and grain.

www.bloomberg.com

Russia’s X5 Retail Group Opens Trade Office in Hong Kong

Russia’s X5 Retail Group has opened its first overseas sales office in Hong Kong, the company said in a press release.

X5 is also considering opportunities to establish similar trade offices in Central Asia and South America.

“A permanent presence in Hong Kong, the business getaway to South-Eastern Asia, will enable X5’s procurement team to improve purchasing terms and build up the share of direct imports in a number of product categories, primarily fruit, vegetables, seafood and non-food goods,” the company said.

“In 2017-2018, X5 intends to establish direct imports from another six countries – Bosnia, Mexico, Namibia, Madagascar, New Zealand and Iran. The Company is open to cooperation with producers from other countries looking to tap into the Russian market and is ready to offer favorable procurement terms,” the company said.·

In 2017, the number of countries where X5 has direct relationships with suppliers reached 27. Direct imports already account for almost 50% of supplied fruit and berries. In the 18 months after the launch of the direct import programme, the total number of direct suppliers reached 200.

X5Retail Group is one of the leading Russian food retail companies. The company manages the stores of several retail chains: neighborhood stores under the Pyaterochka brand, supermarkets under the Perekrestok brand, hypermarkets under the Karusel brand, Express-Retail stores under various brands.

As of September 30, 2017, the company operated 11,326 stores.

Net profit of X5 under the international financial reporting standards for the 9 months of 2017 increased by 30.7% compared to the same period of the previous year, to 25.97 billion rubles ($439 mln). Revenue reached 933.3 billion rubles ($15.7 bln), which is 26.2% up year-on-year.

www.tass.com