Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Update - Nadeem_Walayat
2.Will Deutsche Bank Crash The Global Stock Market? - Clif_Droke
3.Gold Price In Excess Of $8000 While US Dollar Collapses - Hubert_Moolman
4.BrExit UK Economic Collapse Evaporates, GDP Forecasts for 2016 and 2017 - Nadeem_Walayat
5.Gold Stocks Massive Price Correction - Zeal_LLC
6.Stock Market Predicts Donald Trump Victory - Austin_Galt
7.Next Financial Crisis Will be Far Worse than 2008/09 - Chris_Vermeulen
8.The Gold To Housing Ratio As A Valuation Indicator - Dan_Amerman
9.GDXJ Gold Stocks - A Diamond in the Rough - Rambus_Chartology
10.Gold Boom! End Game Nears As Central Banks Buying Up Gold Mining Companies! - Jeff_Berwick
Last 7 days
Donald Trump Failing to Recover After 1st Debate Hillary Shimmy Loss - Betfair Betting Market - 30th Sept 16
BEA Revises Q2 2016 US GDP Growth Upward to 1.42% - 29th Sept 16
Could the OPEC deal set stage for the Next Stock Market Risk Rally? - 29th Sept 16
Why Trump Lost, Hillary Won the 1st U.S. Presidential Debate - 29th Sept 16
Is a Dollar Crash Imminent After the Senate Overrides Obama Veto on Saudi 9/11 Bill? - 29th Sept 16
2017: Gold and Silver's Year of "Public Recognition" - 29th Sept 16
Did Trump Win the 1st US Presidential Election Debate? - There's Something Happening Here... - 29th Sept 16
FED Goes from ZIRP to NIRP! - 29th Sept 16 - Chris_Vermeulen
Here’s Why You Should Be in Cash Right Now - 28th Sept 16
The Fed Put a 50% Tax on Your Retirement Plan - 28th Sept 16
Massive Chinese Debt And Why They Are On A Gold Buying Binge! - 28th Sept 16
Stocks Commodities and FX Markets Waiting Technically While Fundamental Data Neutral Poised - 28th Sept 16
This Commodity Has Perked Up its Investors' Portfolios - 27th Sept 16
Charting the Continuing Gold Market Correction - 27th Sept 16
Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - 27th Sept 16
Financial Markets and FX Setups 27th Sept - 27th Sept 16
Crude Oil, Forex and Stock Market Trend Forecasts - 27th Sept 16
Why There is Trump - 27th Sept 16
Save Up to 70% in Shopping Expenses for Daily Items - 27th Sept 16
Gold’s Moving Averages and Long-Term Outlook - 26th Sept 16
September Stock Market - The Not So Silent Demise of Deutsche Bank - 26th Sept 16
SPX sell signal confirmed - 26th Sept 16
SPX is testing the next level of support - 26th Sept 16
Outrageously Entertaining US Presidential Campaign Final Stages - What Happens Next? - 26th Sept 16
BoJ, FOMC and Where To Now? - 26th Sept 16
Stock Market New All Time Highs Next - 26th Sept 16
Why Trump Will Win US General Election 2016 Prediction Forecast - 26th Sept 16
Martial Law Rolls Out Across the US As Jubilee Nears - 26th Sept 16
Stock Market More Correction Likely - 25th Sept 16
US Presidential Election Forecast 2016 - Trump Riding BrExit Wave into the White House - 25th Sept 16
US Economy GDP Growth Estimates in Free-Fall: FRBNY Nowcast 2.26% Q3, 1.22% Q4 - 24th Sept 16
Gold and Gold Stocks Corrective Action Continues Despite Dovish Federal Reserve - 24th Sept 16
Global Bonds: Why Our Analyst Says Things Just Got "Monumental" - 24th Sept 16
Where Did All the Money Go? - 23rd Sept 16
Pension Shortfalls Could Be 4X To 7X Greater Than Reported - 23rd Sept 16
Gold Unleashed by the Fed - 23rd Sept 16
Gold around U.S Presidential Elections - 23rd Sept 16
Here’s Why Eastern Europe Is Doomed - 23rd Sept 16
Nasdaq NDX 100 Big Cap Tech Breakout ? - 23rd Sept 16
The Implications of the Italian Banking Crisis Could Be Disastrous - 22nd Sept 16
TwinLakes Theme Park Summer Super 6 FREE Return Entry for Real? - 21st Sept 16
Has the Silver Bullet Run Out of Fire Power? - 21st Sept 16
Frack Sand: The Unsung Hero Of The OPEC Oil War - 21st Sept 16
What’s Happening With Gold? - 21st Sept 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

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

© 2005-2016 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

Catching a Falling Financial Knife