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Sanctions-Evidence Helps Russia Keep the Economy Chugging Along

President Vladimir Putin's efforts to protect Russia after previous rounds of US sanctions leave the economy more isolated, even though the threat of further punishment rages the markets this week.

Four years after the first big rand introduced Ukraine's crisis, Russia's economy is growing as fast as the central bank believes it can, thanks to the policy that has enabled the currency to trade freely and reduce dependence on foreign capital. But the vast self-adhesion means that growth is hardly enough to achieve Putin's goal for dramatically raising the standard of living.

Slope from here

The Russian economy is lowered by fastest growth this year

Source: Federal Statistics Office, Russia's forecast

Data calculated as early as Friday shows GDP 1.9% last quarter compared by a year earlier, compared with 1.3 percent in the first three months, according to the median of 20 forecasts in a Bloomberg survey. This is compared with Russia's estimate of between 1.8 percent and 2.2 percent.

In view of a long-term draw, sanctions restrict access to foreign technology and capital, Russia has counteracted by modernizing its fiscal and monetary policy, channeling extra income into a wealthy wealth fund and loosening most of its holdings of US government bonds. Although domestic assets have suffered as a sense of sanctions, Russia is less vulnerable to outflows of foreign capital than its challenges like Turkey.

"Russia is more prepared," said Charles Robertson, global chief economist at Renaissance Capital. "They try to say that bad things will be, the government will not borrow a lot of money, it will not require funding from abroad."

Russia Bank said Friday that it planned foreseen foreign currency purchases in response to the volatility of the ruble. The Russian currency paired some of its losses after the statement. It has weakened about 5 percent against the dollar in three days, the second worst artist among 24 emerging markets tracked by Bloomberg.

All About USA Sanctions directed against Putin's Russia: QuickTake

Congress weighs ] draft legislation proposing more sanctions targeting Russia's sovereign debt and its largest banks, in response to alleged electoral mediation. The US government department also announced new restrictions to punish Putin's government for the nerves attacking a former spy and his daughter in Britain

Russia will treat all measures that restrict banking or the use of foreign currencies as an act of " economic war ", Prime Minister Dmitry Medvedev warned in television comments on Friday.

What our economists say …
"The US is likely to eliminate the extreme scenarios – sweeping restrictions on trade and debt – but investors can not wait to see what's happening. The pressure on the ruble and prices can bear a sharper sting, squeeze household budgets and increase borrowing costs. "

– Scott Johnson, economist, Bloomberg Economics.

For more, see his RUSSIA INSIGHT [19659025] Putin is looking ahead to the economy to outperform the global expansion, which the International Monetary Fund predicts 3.9 percent this year and next year. But without structural reforms, the Russian central bank has warned that medium-term GDP growth will not exceed 1.5 percent to 2 percent.

A rally in oil helps to tear the economic pain of the scratch with the United States. more, the government's efforts to improve tax collection have lowered the price of raw Russia has to balance its budget to a forecast of $ 61 per barrel this year from 67 USD in 2017, according to Alfa-Bank. With a higher VAT rate that will come into force in 2019, the lender estimates next year's level of equilibrium at around $ 50, which would be the lowest since 2008, making Russia least dependent on oil among major raw producers.

Still, the reduction of sanctions limits investment and Russian access to technology. In the medium term, Western restrictions may result in a cumulative production loss of 9 percent, according to the IMF. The July analysis of the domestic credit rating agency ACRA found that the penalty affected one-fifth of Russia's GDP. At the same time, Russia's repression measures pushed up prices and reduced personal income by 2-3 percentage points 2014-2018.

"If the new sanction proposal is approved and the United States raises the measures, then in the near future, we can forget about growth in the area by 2 percent," said Tatiana Orlova, economist at Emerginomics in London.

Zoya Shilova and Olga Tanas

(] Updates to the Sixth Paragraph Bank of Russia, Medvedev in the Eighth. )

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