интересная статья
What Happened To Russia?
01-19 11:48 Caijing Magazine comments( 0 )
While oil prices were no doubt a factor in Russia's sudden plunge, the current situation cannot be explained with looking at the country's banking system.
By Jonathan Anderson, Chief, Asia-Pacific Economist for UBS
From Caijing Magazine
For this month’s column we want to discuss what could be the biggest emerging-market risk factor in 2009: Russia.
Twelve months ago Russia was one of the more dynamic success stories in the emerging universe. Buoyed by oil prices, which rose from only US$ 12 per barrel in the late 1990s to more than US$ 100 per barrel ten years later, the Russian economy was able to bounce back quickly from the default and currency crisis of 1998.
For a time, it average annual growth of nearly 7 percent in real terms – and, after accounting for trend ruble appreciation, it had yearly US dollar GDP growth of more than 25 percent, a pace far faster than China’s growth over the same period.
In 1999, Russia’s average national income was US$ 1,500 per head. Only eight years later the figure had shot up to more than US$ 9,000. And in the process Russia paid off most of its sovereign debt, amassing a foreign exchange reserve chest of nearly US$ 600 billion.
Now compare this with the situation last week when I visited Moscow. The banking system was in disarray, with smaller banks under threat of bankruptcy and the central bank urgently putting in liquidity to buoy up confidence. Many companies were desperately short of cash, unable to receive payments for services rendered and facing maturity deadlines on outstanding debt. Credit spreads on both domestic and foreign instruments had shot up to extreme levels even by emerging market standards.
Industrial production had fallen nearly 10 percent year on year in November, a virtual collapse of real activity, with little hope that the December numbers would show a significant improvement. Worried depositors were leaving the banking system, either holding cash under their mattresses or rushing out into foreign currency. The ruble had already fallen nearly 30 percent from its peak value against the dollar back in April 2008, and Russia’s famed pile of external reserves had dwindled by more than a quarter to US$ 440 billion, with losses running at nearly US$ 50 billion per month (Chart 1). In short, Russia gave every impression of being on the edge of a crisis.
How did this happen? To many the short answer is oil prices, and that is of course part of the story – but not the whole story by far. After all, even at a price of US$ 40 to 50 per barrel, Russia still runs an external current account surplus. This means a government budget deficit at home, but with very low debt and high fiscal reserves, there was no reason to look for massive instability coming from here. And oil prices today are still well above their level at the beginning of Russia’s historic growth rally.
Rather, much of the real problems lay in the banking system. To put it very simply, domestic lending and leverage just got ahead of themselves. Between 2001 and 2008, the overall credit-to-GDP ratio rose significantly as companies borrowed to expand production and undertake acquisitions. More important still, the aggregate banking system loan-to-deposit ratio reached 120 percent, a very high level by emerging market standards, which meant that commercial banks as a whole were dependent on short-term wholesale finance, asset sales and capital-raising from abroad to keeping credit flowing.
So when oil prices dropped sharply in the middle of 2008, the market received a stronger-than-expected shock. Confidence in credit institutions suddenly disappeared, wholesale finance dried up, and companies were stuck with relatively high leverage ratios and no access to new credit. Investors immediately sold off debt instruments to meet liquidity needs, which pushed spreads and yields to extreme levels.
At the same time, much of the foreign portfolio capital that had rushed in to take advantage of Russia’s booming equity and debt markets pulled back out, foreign exchange reserves began to fall sharply. This in turn caused domestic depositors to take funds out of banks and buy dollars, leading to a vicious circle of banking system troubles and reserve losses. In this environment, the authorities acted quickly to push new liquidity into the system, but with interest rates far too low to compensate for inflation and expected depreciation, many banks took the money and went “out the door” into dollars as well.
Meanwhile, the combination of severe liquidity and credit shortages at home, and a pullout of foreign capital, naturally led to the collapse of production in the fourth quarter of the year (Chart 2). At this point, Russia faced a real problem.
So where do we go from here? The good news is that it’s not too late to take corrective measures and, in particular, to hike domestic interest rates sharply to stabilize the currency and boost demand for domestic deposits. Sure enough, Russia was the only emerging country to raise policy rates in November and December, at a time when most central banks were lowering them. And the December foreign exchange reserve numbers show a moderation in the pace of decline from the sharp drops in October and November, with the ruble starting to level off in early January.
On the other hand, it’s still early days, and the risks to the Russian economy remain high, especially if oil prices continue to fall in 2009. And this is one of the few emerging markets big enough and important enough to have significant contagion effects if a crisis were to emerge. So we strongly recommend that emerging investors keep a close eye on Russia going forward.
Голосование