INVESTMENT CLIMATE

Companies looking to expand in Russia should get good deals

Online 2020 closing joint meeting of the Belgian-Luxembourg Chamber of Commerce in Russia and the Belgian-Russian Business Club has taken place, themed Inspiring challenges and assessing prospects: Russian Economic Agenda 2020–2021.

The web lounge event moderated by Oleg Prozorov, CEO of BLCC, was opened by H.E. Ambassador of Belgium to Russia Marc Michielsen who noted that “2021 may be the year when we leave COVID behind us and we can look forward to interesting things like reinforcing business ties between the two countries.”

As Johan Vanderplaetse, Belgian-Russian Business Club President pointed out, “Macroeconomic situation in Russia in January, February and early March of 2020 looked very well and economic progress was being made. Then Russia confronted three crises: the pandemic, oil shock, and geopolitical issues and sanctions. The fact it could withstand the hardships says a lot about its solid macroeconomic fundamentals. Russia is weathering the storm rather well with exception of SMS sector.”

Mr Chris Weafer, founder of Macro Advisory, an independent macro consultancy which provides macro-economic and business trend advice for business managers and investors working in Russia and the CIS, presented his detailed overview of the current situation in Russia and prospects for the near future, noting, “There was every reason to be optimistic about the start of the year including that of the government becoming more serious about core sectors and pushing ahead a big spending program. Despite the problems of 2020 such as COVID and oil prices, promising opportunities are not gone but they were merely interrupted. The government remains committed to development programs. There are expected effective changes in order to attract foreign investment.”

In his view, “Russia’s economy is too dominated by state (over 60% of national GDP) and by big industries. The percentage of SMS entrepreneurs is far too small. And for any economy to grow and change it should be the other way around.”

This is the fourth crisis in last 23 years, but unlike previous ones the government now has resources available. Over the past years there has been a reduction in vulnerability due to hydrocarbons volatility,” he said. “The country is in a good shape and its current financial position is strong with no concerns about debt or funding the programs announced by the government or the budget deficit for several years. The economy is slowly recovering from the 1Q20 decline and should pull back to pre-COVID levels by mid-2021.” Besides, authorities manifest their “commitment to rebuilding real incomes in real terms.”

Though government holds a public position that no new inward investment is possible for some while, when COVID is over, there are likely to be more incentives and efforts to attract foreign investors. Companies who are looking at possibilities of expansion into Russia should be able to get good deals,” Chris Weafer stated.

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