RUSSIA MACRO-POLITICS: ONE STEP AT A TIME

FINANCIAL ANALYSIS

by Chris Weafer

“Although it is said that faith can move mountains,

experience shows that dynamite works better” 

Anon

Moving up the rankings. The main news last week was the gain in Russia’s ranking in the World Bank’s 2014 Ease of Doing Business survey. Russia is now ranked 92^nd (out of 189 countries) having moved up from 111^th last year (details below). This does not have any immediate impact on the perception of equity risk, on valuations, on earnings growth, nor on the medium-term macroeconomic indicators. It is important because it shows that the government’s commitment to business reforms is starting to yield some results. 

Russia now ranks 10^th best in the world for contract enforcement.  That disposes of a popular mis-conception about the risk of doing business in the country. 

Reform progress since the last elections. Over the past eighteen months we have seen more progress in advancing reforms that ever before. The list includes WTO entry, capital market reforms, anti-corruption legislation and better budget discipline. It can be argued that these changes are still not much more than a drop in the ocean relative to the size of the problem still to be addressed. But at least we now have reform momentum and that’s not something we could have said before the summer of 2012. 

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