Russia: a crisis of investor confidence
Recent events around the Crimea have compounded the lingering investor confidence and exposed the economic weakness of the Russian growth model. Business and consumer sentiment in Russia remain weak. In 2013, feeble domestic demand dragged the Russian economy close to stagnation.
When major infrastructure projects came to an end in early 2013, the spare capacity was immediately felt in the economy. Then the expectation that private investors would start investing more during the second half of 2013 did not materialise. The lack of growth to support structural reforms and decreasing profit margins weighed heavily on business sentiment and pushed down industrial activity and investment.
Currently very high risks for investors in Russia remain. Whether equity prices have hit the bottom, or investors would demand even higher potential return before re-entering the market, remains to be seen. Nevertheless, if the situation unfolds faster than currently expected, longer-term investor rewards could be high.
So with Russia remaining “a riddle wrapped in a mystery inside an enigma”, as Winston Churchill famously put it, read senior research analyst Victoria Chernykh’s in-depth analysis of the country’s current economic and investment climate.