Russia’s key economic indicators exceed expectations in January
The country’s economy is on track to grow this year ater shrinking 3.1 per cent in 2020, its sharpest contraction in eleven years
Russia’s main barometers of economic health, such as employment, consumer demand and wages, all exceeded expectations in January, opening the door for economic recovery in 2021, an official data showed.
Russia’s commodity-dependent economy is on track to grow this year ater shrinking 3.1% in 2020, its sharpest contraction in 11 years which, however, was smaller than expected.
Economic growth and a recovery in living standards in Russia are a crucial issue for President Vladimir Putin and the United Russian ruling party. The later is bracing for parliamentary elections in September amid massive street protests that rocked Russian streets earlier this year.
The Federal Statistics Service, or Rosstat, said Russia’s jobless rate slipped to 5.8% in January from 5.9% in December, while analysts polled by Reuters had forecast unemployment of 6.0%.
Retail sales, a barometer of consumer demand that is Russia’s main driver of economic growth, slipped 0.1% year-on-year in January versus expectations for a 3% drop predicted by a Reuters poll.
Real wages, which are adjusted for inflation, rose 4.6% year-on-year in December, jumping 39.5% month-on-month, while analysts on average had forecast a 1.5% annual fall in the last month of 2020. Surprisingly optimistic figures from Russia’s statistics agency have alarmed some experts and investors in the past, raising concerns about data accuracy which Rosstat has always dismissed.
In 2021, Russia’s economy was on track to grow by 3-4%, the central bank said last week, when it kept interest rates at a record low level and indicated it will start raising them in the foreseeable future.
Meanwhile, Russia’s central bank on Thursday warned banks of the risks in investing non-banking services, such as e-commerce and food delivery, and said it was drating special regulations to protect the interests of depositors and investors.
Some Russian banks, including the country’s biggest lender Sberbank, are diversifying away from their core business to offer wide-ranging services, such as online marketplaces, food delivery and video streaming.
Sberbank has said it expects its non-financial businesses to generate 60% of company revenues by 2030, with e-commerce at the heart of a new three-year strategy. It also counts the Rambler media group and Okko online cinema among other assets. Central Bank Governor Elvira Nabiullina said these “ecosytems” were certainly atractive for consumers, giving people all the services they needed in one place.
But Nabiullina, speaking at a conference, said they carried their own risks, too, when banks invest depositors’ funds in new businesses and their expansion.
“The return from these businesses can be smaller and come later than the bank ... expects,” she said. “And we must defend the interests of depositors and investors.”
“Ater all, a person has the right to expect that if they put money in a bank, then it is not their problem how profitable the online cinema business will be, or even the network of online cinemas the bank owns.”
Nabiullina did not name any of the banks. Her comments mark her harshest atack yet on the shit away from mainstream banking.
Earlier on Thursday, Nabiullina said the peak of loan restructuring had passed and that the banking sector was ready to live without COVID-19 support from the regulator.
Separately, Russian food retailer Magnit is focused on improving profitability between 2021 and 2025, driven by increased sales density and new technologies, the company said.
Russia’s retail landscape shited in 2020 as the coronavirus pandemic kept consumers at home, driving demand for e-commerce and cheaper goods.
Magnit said it would create an e-grocery plaform, capable of supporting 5% of company turnover, to beter compete with rival X5, which overtook Magnit in revenue a few years ago.
Commercial margins, more private label goods and new technologies are expected to boost gross margins, said acting CFO Dmitry Ivanov at a capital markets day. The company aims for private label to make up 25% of sales by 2025.
Magnit said it is aiming to achieve an EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin of 8%, up from 7% last year, while prioritising high returns and strong dividend payments for shareholders.
Magnit, whose shares in Moscow were down around 1.5%, is transitioning from a supply-driven to a customer-centric approach, said Chief Executive Jan Dunning.
“Consumers are looking for value; they are looking for price quality,” he said, adding that Magnit’s private label would help in this regard.
Focusing on efficiency improvements, Dunning said Magnit plans to open 1,000 to 1,500 convenience stores, 750 to 1,000 pharmacies, and five to 15 supermarkets and superstores on a gross basis each year.