1 Political situation
1.1 The second convoy of Russian humanitarian aid for the Ukrainian Southeast citizens suffered from junta bombing delivered food and medicine on 200 trucks, all trucks now came back to Russia
1.2 EU postpones the implementation of the key provisions signed the Association agreement with Ukraine until 31.12.2015. In response, Russia promised not to impose sanctions and will not achieve the Ukrainian economy.
1.3 Summit of heads of States-members of the SCO (Kazakhstan, Kyrgyzstan, China, Russia, Tajikistan and Uzbekistan), as well as senior representatives of countries with observer status in the organization (Afghanistan, India, Iran, Mongolia and Pakistan held in Tajikistan. SCO countries adopted the Declaration supporting the "Peaceful plan of Putin for Ukraine". Summit also adopted the simplified Declaration on the admission of new members into the ranks of the SCO. India and Pakistan have already expressed their desire to join and are in a line for 2015.
2 Sanctions and Consequences
2.1. A new package of EU sanctions against Russia entered into force on 12.09.2014. The sanctions will affect the Russian oil companies with revenues of more than 1 000 billion rubles as well as some of the largest enterprises of the military industry. Restrict access of Russia to the international capital market is strengthened too.
2.2 The new sanctions, the price of oil immediately has had a negative effect on the dynamics of the ruble exchange rate. The Russian ruble may continue its decline.
3 Economic situation and investing
3.1. Before sanctions, foreign investors actively increased investments in the Russian market. During the last week international funds invested in Russia more than $200 million, However, this result does not take into account the introduction in relation to the Russian Federation of a new package of sanctions by the EU, as well as responses the Russian side.
Data of 'Emerging Portfolio Fund Research' for this week, indicate a growing interest among international investors in developing countries. During the week the inflow of funds into investment funds operating in emerging markets amounted to $3.4 billion, or five times more than the amount of funds received a week earlier. Almost continuous inflow of funds continues 14-th week in a row, during this time, investors have invested in funds in developing countries more than $28 billion 3.2. The flow for the reporting period amounted in the aggregate to $203 million, which is almost five times more to attract a week ago. A positive result is recorded and the funds that invest exclusively in the Russian market, where investors have invested more than $140 million a week ago one of them took more than $30 million.. 4. Economy's forecast ( currency rate) 4.1. Inflation. According to research of "ING Eurasia" inflation may reach up to 9%, and "Alpha Bank" is predicting even up to 10% by the mid of 2015.
Currency. Weakness of the Russian economy, the negative geopolitical background, caused by the military conflict in South-Eastern Ukraine, concerns the introduction of additional sanctions against Russia and Russian companies from EU have a negative impact on the Russian currency. Dollar rate on 16/09/2014 makes: 37,98 RBL/Dollar Consensus forecast of the Russian banks on 20/09/2014 makes 37,75 RBL/Dollar1 Political situation
1.1. In Eastern Ukraine on October 11 was declared "silence mode", which provides a complete stop of fighting. There is a hope that in the near future Ukrainian army and the rebels begin the removal of artillery. The parties periodically accusing each other of violating the agreement. In Donetsk the next day after the introduction of a "silence" Ukrainian army continues to kill civilians .
1.2.The migration service of Russia informs, number of labor migrants in Moscow became visibly more at the expense of the citizens of Ukraine (data as of October 13, 2014), the Number of labor migrants in the Moscow region increased, including at the expense of the citizens of Ukraine, From January to September registered 950 thousand arrivals of foreign citizens, of which about 90% are coming for employment. The migration service has noted an increase of foreign nationals by 14%, mainly at the expense of Ukraine, Tajikistan and Moldova taking into account results of events in Ukraine Federal Migration Service sees a steady increase in the entry of nationals of neighboring countries on the territory of the Moscow region.
2 Sanctions and Consequences
2.1 In the framework of the session of the IMF, the World Bank, there were arranged consultations with the Russian Central Bank and the National Bank of Ukraine The IMF expects that the Russian-Ukrainian conflict will lead to growth of the external debt of Ukraine to the "Greek" level above 100% of GDP in 2015, but nevertheless IMF insists on requiring additional support for deep economic reforms in the country.
2.2The forecast of the IMF in Russia prognoses in 2015 and suggests the abolition of the at least European sanctions against Russia and the Russian food contra-sanctions in 2015
In General, the IMF and the World Bank in their prognoses for the Russian Federation, were neutral. Indeed, except for the underlined attention and understanding, the IMF and the WB have a little to support Russia.
3 Economic situation and investing
3.1. Edition "The Los Angeles Times" wrote that the fall in oil prices, partly due to the shale (gas) revolution in the US will hit Russia and Iran stronger than Western sanctions, If you look at the prices, only from June 2014 oil prices on world markets fell by about 20% due to increased of oil production and a slowdown in economic growth in Asia and Europe.
3.2.Russia considers the most promising cooperation with Asian countries, primarily with China. On October 12-13,the Russian Prime Minister and PM from China, have signed more than 30 agreements.
3.3.Russian President Putin said that Moscow is not interested in the collapse of economic ties with Europe. Putin focused attention to the vigorous growth of Asian economies and China in particular, China's economic growth should be used for economic development of other countries. He mentioned: among the priorities of Russia's deepening business, trade, investment and technological cooperation with the countries of Latin America, the Asia-Pacific, with our colleagues in the BRICS, including China and India.
4 Economy's forecast (inflation and currency rate)
4.1 The head of the auditors chamber of Russia has given a speech at parliamentary hearing, who said that a serious risk to the Russian economy is the limited internal financial resources and may be more difficult to attract external finance. In 2014 and in subsequent periods, the inflation rate may be higher than expected, to achieve the expected level of inflation at 7.5% for 2014, in October-December, it should be 1.1 %. Last year during this same period, the inflation rate was 1.7 %. These figures today are already unrealistic. Additionally, the auditors pointed to the restrained dynamics of the standard of living of the population, while consumer demand in recent years has been one of the factors supporting economic growth. Chairman of auditors said that in the years 2015-2017 budget expenditures will increase by 1.5 trillion rubles, their share in GDP will be reduced from 20 % to 19%. The main tool for the formation of the expenditure side of the budget will remain the government programs. Currency The reasons for the continued pressure on the Russian currency is still the current shortage of foreign exchange liquidity in the domestic market plus ssituation with oil prices in the world market. Concensus forecast of the Russian banks on 18/10/2014 makes 40, 30 RBL/Dollar.