Media: Foreign business fleeing Russia in 3 year record
Foreign business has drastically reduced its investment in the Russian economy according to the Russian Central Bank’s statistics on the balance of payments for 2017, finanz.ru reports.
At the end of the year, the flow of foreign investments, i.e. the investment in the real sector as open business or the purchase of shares in companies has fallen by 25%.
In the fourth quarter, non-residents who had operated in the Russian market wrapped up operations and sold shares, after which they withdrew $1.6 billion.
The outflow of direct foreign investments on a quarterly basis has been recorded by the Central Bank only three times since 1992: even amidst the default of 1998 and the world financial crisis of 2008/2009, Russia’s real sector received money from abroad.
The total outflow was the second largest in the country’s recent history: only in the fourth quarter of 2014, at the peak of conflict in the Donbas, sanctions, the collapse of oil and the ruble, did investors leave more quickly, withdrawing $1.9 billion.
The final annual figure remained positive – an inflow of $23.2 billion. However, this is only half as much as in 2011, and just over half as much as the figure for 2013.
The Russian Central Bank’s statistics mean that non-residents are changing priorities – instead of investing in the real sector, they are preferring financial speculation, actively purchasing Russian government bonds or corporations’ securities; this could mean a growing distrust, remarked Sergey Pukhov, head researcher at the HSE Development Center.
“Islets of prosperity” are created artificially in Russia, at the expense of the budget, but on the whole the investment climate is “too cold”, observed IMEMO international markets department head Yakov Mirkin. The economy’s prospects for growth remain unclear: the population’s income is falling, and the profitability of all business except for the sale of minerals abroad is shrinking rapidly.
According to Rosstat (Russia's state statistics agency), between January and September, mining companies’ profit jumped by 20%, and oil refinery plants’ profit by more than 60, while in the manufacturing industry the balanced financial result dropped by 11%, and in trade by 22%; construction companies’ profit plummeted by 50%.
The situation is aggravated by sanctions: in 2017 the illusion developed that someone would come and lift the sanctions, chief economist of Matrix Capital Evgeny Gavrilenkov commented: “The pressure on Russia will continue for a decade at least.”