Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
Silver Tunnel Vision 'Experts' - 1st July 15
Gold And Silver - Monthly, Quarterly Ending Analysis - 1st July 15
Europe’s Controlled Demolition - 1st July 15
The End of Dow 18,000; Bailouts No Longer Extended  - 1st July 15
Athens Mayor: Greek Government Should Resign - 1st July 15
China Stocks - This Is What a Bubble Looks Like - 30th June 15
Stocks Plunge on Greece Euro-Zone Financial Armageddon Blackmail - 30th June 15
Greece Crisis Shows Importance of Gold as Europeans Buy Coins and Bars - 30th June 15
Stock Investors Express Route to Profits in the Healthcare Sector - 30th June 15
Beyond the Greek Impasse - 30th June 15
Gold GDXJ : Impulse Move Pending - 30th June 15
Fed Interest Rate Increase Could Be Best Thing to Happen to Gold - 30th June 15
Marc Faber - Greece is Basically Bankrupt - 30th June 15
Greece - Shoot the Dog and Sell the Farm - 29th June 15
Grexit?, BIS Warning, Chinese Market Crash & Systemic Risk Shake the Global Economy - 29th June 15
The New "Sharing Economy" May Not Be the Profit Bonanza Everyone's Expecting - 29th June 15
Gold and Silver Greece and Short Positions - 29th June 15
Volatility and Sleep-Walking Markets - 29th June 15
Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - 29th June 15
Stock Market More Decline Ahead? - 29th June 15
China Stock Market Crackup - The Final Trap Looms... - 29th June 15
Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - 28th June 15
Investor Stock Play for Two Growing Missile Threats - 28th June 15
Stock Market Uptrend/downtrend Inflection Point - 27th June 15
Greece Crisis OXI - 27th June 15
Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - 27th June 15
It’s Time to Change the Way You Look at Disney Forever - 27th June 15
Flatline Investing and Dead End Debt Schemes - 27th June 15
Stock Market Investors Avoid the "Herd" Like the Plague - 26th June 15
Extreme Gold/Silver Shorting - 26th June 15
USD Daily, Weekly, Monthly & Conclusions - 26th June 15
Gold Price Target of USD 2,300 - 26th June 15
Gold and Silver - Another Successful Option Expiration For the Insiders - 26th June 15
Why Buffett Bet A Billion On Solar Energy - 26th June 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

Euro-zone Crisis Will Hit Russia Hard

Economics / Russia May 28, 2012 - 04:38 AM GMT

By: Pravda

Economics

The political collapse in Greece and Moody's downgrade of the rankings of 16 Spanish banks at once have led to the decline in stock indexes all over the world. In Russia, the head of the Central Bank, Sergei Ignatiev, showed an optimistic reaction to such unpleasant news. Making a speech at the government last week, the official urged everyone not to panic. According to him, Russia is prepared to the crisis much better than it was four years ago.


Economists say, though, that there are no reasons for optimism. The country is prepared for the new wave of the crisis much worse than it was in 2008. Should something happen to the oil prices, everyone will feel the consequences very soon.

Aleksei Ulyukayev, first deputy chairman of the Central Bank of the Russian Federation, does not believe that the world economic crisis may occur again either. He believes that Russia entered the period of high degree of volatility and is going to stay there for years. It means that the probability of local crises (sovereign debt, stock markets) is rather high. However, one should not expect a decline similar to that in 2008, Ulyukayev said.

Russian experts with the Higher School of Economics compared the state of affairs in the Russian economy in the first quarter of 2012 with the results of the first quarter of 2008. The current economic situation is worse, they concluded.

The research, which the experts conducted, showed that the state of affairs with the foreign debt was better, whereas the growth of the bank crediting was based on the financial support from the Central Bank, rather than on deposits or foreign borrowings, as it was in 2008.

There are reasons for worries, indeed. The outflow of capital from Russia in April made up $7 billion, and the process may continue in May. "In this connection, the optimism of the head of the Central Bank looks more than just strange," experts concluded.

Russia becomes more and more dependent on the oil prices, they added. The level of the oil and gas deficit remains near 10% GDP, and it can not be cut during the forthcoming years.

Even if oil prices drop moderately to $80 per barrel, the volume of the Reserve Fund lwill not let the Russian economy stay afloat for at least one year. Th budget obligations can be fulfilled only if oil prices grow by 8-9 percent annually.

Experts also said that in order to realize grandiose plans, the government needs grandiose assets. The assets can be attracted only if the investment climate in the country improves. However, investors can see presumably negative signs.

The current outflow of capital is comparable to most critical quarters in 2008-2009. they have already exceeded the inflow observed four years ago twice.

In May, the Central Bank of Russia announced the stagnation of the banking sector, which occurred during the first quarter of 2012. The banks do not have the reserves to increase their credit offers. The currency instability is also obvious. The US dollar has gained two rubles to its cost since March 2012.

However, the Central Bank does not believe that the situation is alarming. Quite on the contrary, CB officials say that there is a healthy trend in Russia, which replaced the crazy recovery growth of the recent years, when the financial sector was growing by 20, 30 and even 50 percent. Central Bank officials say that the crisis in the eurozone can pose a risk to the Russian banking system, but such risks will be moderate and acceptable.

It is possible that the Central Bank does not want to cause panic in the country: the Russian market has been extremely nervous lately.

Pravda.ru

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Pravda Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History