Expert opinions

Anders Borg: There is an upside potential for a stronger recovery in Russia

In the run-up to the Gaidar Forum, organized by the Russian Presidential Academy of National Economy and Public Administration (RANEPA) and taking place in Moscow on January 15 and 16, Invest Foresight received a comment regarding global economic outlook from Anders Erik Borg, former Finance Minister of Sweden and East Capital’s Advisory Committee member.

As Mr Borg pointed out, “The outlook for 2020 is fairly optimistic as the global economy is in a fragile recovery. Central banks are providing support in all the major economies and low inflation puts a lid on interest rates. The slowdown in China and Germany, particularly strong in the automotive and manufacturing industry, is starting to bottom out. The automotive industry is in a structural shift towards electric cars and car sales in China have been weak on the back of high indebtedness and weak consumer confidence.”

“The fact that the trade war is de-escalating, at least for now, and that Brexit creates less noise is positive. Geopolitical tensions in the Middle East and political uncertainty, not the least given the upcoming presidential election in the USA, remain important risk factors. I expect oil to move sideways in a range between $50-70 moving forward.”

Assessing Russia’s prospects, Mr Anders Borg noted that the country “is in a soft recovery. Low inflation and increased credibility of the inflation target will open a path towards further rate cuts and lower interest rate. The stock market has support from high direct return and low valuations. There is a trend towards better corporate governance, not the least driven by demands to create shareholder value that will be supportive for higher productivity growth in the long run. The tech sector and the digitalization of services, in particular in the financial sector, will be key drivers of growth.

“To sustain the recovery two factors are crucial. It is important to sustain and reinforce the implementation of structural reforms. Increased labor supply and lower cost of doing business is important. A better entrepreneurial climate would also open up the potential for breading more tech unicorns in Russia. The effort to de-escalate the conflict in Ukraine is important. A stronger economic cooperation between Russia and the rest of Europe would open up for higher foreign direct investments. A more open investment regime would facilitate higher investments from the Germany and the Nordic region, the key long term technology partners for Russia.”

“One should be realistic, but to my mind there is an upside potential for a stronger recovery in Russia in 2020,” Mr Borg concluded.

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