Last updated: 11:57 / Friday, 15 April 2016
Says Global Evolution

The Economic Mix in Russia is Very Supportive for Fixed Income Investors

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The Economic Mix in Russia  is Very Supportive for Fixed Income Investors
  • Without structural reforms longer term potential growth is at most 2%
  • The Russian Ruble should be well supported with oil barrels at $40
  • Russia’s Central Bank “will do whatever it takes” to get 4% inflation

Despite suffering from the collapse in energy prices, and a -3.7% GDP growth in 2015, Russia’s financial assets have been having a positive performance, but can this go on?

According to Lars Peter Nielsen, Senior Portfolio Manager at Global Evolution and part of the team that In March 2016 visited Russia to evaluate if the recent strong performance of financial assets can continue, “the economic mix is very supportive for fixed income investors. We are increasingly convinced that inflation will come down strongly this year and be close to the 4% target next year which should provide further support for local currency denominated debt. The Russian Ruble should also be well supported as long as the oil price is stable around USD 40 per barrel. If RUB was to appreciate strongly we could see the Central Bank start to rebuild reserves, but they seem to prefer a stronger RUB for now to help combat the inflation."

Global Evolution believes Russia’s Central Bank “will do whatever it takes” to get 4% inflation. they are also certain that Russia’s GDP will continue in negative territory in 2016, and “Without structural reforms longer term potential growth is at most 2%." accompanied by a tight fiscal policy.

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