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Russia’s private sector remains strongly positive towards growth.
Russia’s private sector remains strongly positive towards growth.

Russia BCI Rises

Russia BCI Rises

Business confidence in Russia has risen to a level not seen since June 2013, the Markit Economics research organization said Monday citing results of its survey.

Since the global oil prices plummeted in 2014 and western countries imposed sanctions against Russia over referendum in Crimea, the Russian economy faced serious challenges. According to the Federal State Statistics Service (Rosstat), in 2014 the inflation rate surged to 11.36%, reaching a five-year maximum of 12.91% in 2015, Sputnik reported.

In December last year, Russian President Vladimir Putin instructed the government to adopt an action plan aimed at ensuring that by 2019-2020 the country’s economy growth exceeds the global economy growth rate.

“The latest Markit Business Outlook Survey indicates that Russia’s private sector companies remain strongly positive towards their year-ahead outlook for business activity in February. In fact, business confidence was at its strongest level since June 2013, as the net balance of firms forecasting growth has increased to +29%, up sharply from +18% in October last year. Russian optimism was slightly weaker than the global average (+31%),” the Markit Economics press release reads.

The study conducted from February 10 to 24 found a marked improvement in expectations associated with increased optimism in all sectors of production and services. Russian companies also expect a sharp increase in business revenue over the next 12 months, “at +34%, up from a net balance of +25% in October.” Along with this, according to the study, Russian private sector companies are planning to increase job creation within the next 12 months.

“Greater optimism at firms aligns with stronger readings from the PMI survey data, which hit an eight-and-a-half year high at the start of 2017 as the economy lifted itself to one of the top global economic performers,” Samuel Agass, an economist at Markit, said.

Nevertheless, business confidence is still relatively low, compared to a worldwide average, he said. Agass explained this by saying that not all private companies are convinced that the recovery of the Russian economy is stable.

Russia’s gross domestic product is due to return to sustainable growth in 2017, according to a recent report by Economic Development Minister Maksim Oreshkin.

Meanwhile, the International Monetary Fund’s Deputy Managing Director David Lipton predicts global growth of 3.8% by 2021, with the Russian economy to grow significantly slower at 1.5%.

According to Lipton, Russia should implement some policy changes, reforms and structural changes that will increase the capacity of the economy to catch up with global growth rates.

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