Despite Int’l Pressures, Russia Growth Rebounds

Beset by tough sanctions and worldwide political isolation, a casual observer might be surprised to learn that Russia’s economy isn’t doing all that badly–even if it still has a litany of problems.

In fact, some investors are fairly bullish on the country, where the outlook is bolstered by surging oil prices. However, there are red flags everywhere, including a new round of sanctions against Russian companies and oligarchs aimed at pressuring President Vladimir Putin, CNBC reported.

For the moment, 2018 will mark another year of recovery for the Russian economy after a steep recession triggered by oil’s swoon during 2014. Russia’s growth is expected to reach 1.7% this year, according to a World Bank forecast, largely in line with growth last year but well above the near 3% contraction the country saw from 2015-2016.

Russia “maintained strong growth underpinned by solid productivity, with a sustainable growth trend estimated at 2-2.5%,” noted Denise Simon, head of emerging market debt at Lazard Asset Management.

However, the rebound obscures what Simon explained is “one of the few countries in the world with negative population growth, which reduces their overall growth potential». The population shrinkage—by some measures at around 0.4%—dampens productivity, making growth above 2% difficult to sustain.

Russia’s ability to weather geopolitical pressure and fluctuating oil prices has been sufficient enough for some market observers to tout investment opportunities in the country.

Investing in Russia is definitely “risky”amid the macroeconomic and geopolitical challenges, said Bin Shi, senior vice president and portfolio manager at Acadian Asset Management, with more than $73 billion in assets under management.