ACRA serves as partner at Vedomosti’s conference “A captain’s role in the storm is competent regulation. A macroeconomic forecast and its consequences for the regulator and market players”

Vedomosti newspaper held its conference online on July 28 with about 500 people tuning into the broadcast. ACRA CEO Mikhail Sukhov moderated the plenary session and noted the reorganization of a number of structural areas in the economy since the beginning of the pandemic.

Nikolai Zhuravlev, Deputy Chairman of the Federation Council, commented that all measures were taken thanks to the President’s prompt decisions as well as the coordinated actions of the government, the Bank of Russia, and lawmakers, which maintained stability in the financial and budgetary spheres. “In contrast to previous crises, the state of the Russian financial market under the current stress has turned out to be stable. For the first time, we did not wake up to news about the revocation of licenses, nor did we rush to allocate trillions of rubles to rescue banks or use rehabilitation mechanisms. For the first time in turbulent conditions, the key rate has not soared up. On the contrary, it is steadily decreasing, which helps the economy attract cheaper financing,” said Zhuravlev.

“The fact that the situation has turned out to be stable is due to the readiness of our economy for these kinds of shocks,” said Ksenia Yudaeva, Bank of Russia First Deputy Governor. “In recent years, the Bank of Russia has developed certain tools that we have used to ease regulations. Our long-term policy to reduce and maintain inflation at low levels, to reduce the share of foreign currency in the economy and on bank balance sheets, and to increase the stability of financial institutions has also had an effect.” Yudaeva added that by the end of 2020, the Bank of Russia expects GDP to fall by 4.5–5.5%, and that “essentially, we have already seen this drop as well as some recovery compared to the low point.”

Aleksey Moiseev, Deputy Finance Minister, announced a number of measures that the Ministry is developing together with other authorities. Among them is the development of factoring with guarantee support, which is already included in the national plan to support the economy. He also commented on the preliminary results of the state preferential mortgage program. “Currently, mortgages are growing rapidly in Russia. We will almost certainly close this year with an increase in mortgage lending compared to last year,” noted Moiseev, adding that “the preferential mortgage program is gradually becoming obsolete, as banks are already offering rates well below the 6.5% rate set by the government.” However, the government will continue to develop mortgage programs aimed at specific regions, in particular the far east, as well as rural and children’s mortgage programs.

Aleksey Savatyugin, Auditor of the Accounts Chamber, as well as other participants, noted that the current situation is “a rare case, in which problems came from the real sector, not from the financial market.” However, he warned of the necessity to stop these problems in advance, as they could “catch up with the financial sector” in the autumn and turn into impaired collateral, non-repayment on loans, and ultimately a liquidity risk in the banking sector. “The anti-crisis measures taken by the government and parliament were correct, but they had their price and put a burden not only on the budget, but also on banks, primarily state-owned ones,” Savatyugin stated. He stressed the need to develop the financial market, including taking measures to expand tools to attract new investors.

When talking about the financial market in general and the stock market in particular, Oleg Vyugin, Chairman of the Supervisory Board of Moscow Exchange, noted that today the main problem is Russian issuers’ unwillingness to place shares. “There is money in the market, and investors are ready to invest it, but issuers are not holding IPOs,” said Vyugin. In his opinion, this situation will be addressed if the economy starts to grow. In this case, “capital markets, due to the willingness of investors and sufficiently developed infrastructure, can play a significant role in the recovery.”

“The period of economic recovery may begin as early as 2021, although first the gap that will develop between potential and actual growth rates this year will be closed. Potential growth may only begin in 2022, but for this to happen it is necessary to take certain measures, in particular, boosting investments,” said Yevsey Gurvich, Head of the Economic Expert Group. He also noted that the Russian economy “has learned to take a hit and react less dramatically in the event of negative shocks than in the past, but it still doesn’t know how to recover so well. So despite the fact that the situation is now under control, we need to think about implementing growth models that don’t require a favorable external environment.”

In the second session, which was moderated by Larisa Loznova, Managing Director and Global Head of the Corporate Ratings Group at ACRA, representatives of major Russian corporations discussed how Russian businesses were able to survive the period of restrictions related to the pandemic and what companies can expect when the pandemic is under control.

The participants of the discussion noted that the main lesson from the pandemic was understanding that digitalization and diversification of both business models and risks are essential. In particular, Boris Volpe, CEO of MaximaTelecom, stated that during the crisis “businesses came to appreciate digitalization as a means for interacting with consumers and receiving continuous objective analysis.” In his opinion, digitalization solutions will continue to be implemented most actively in the fields of transportation, housing and public utilities, medicine, education, and the urban environment.

In terms of forecasts, the majority of participants had an optimistic view of the time it will take for their companies’ financial indicators to recover. For example, Andrey Maksimov, Financial Director of KAMAZ PTC, is certain that thanks to the government’s support measures, his company will be able to achieve its initial targets in H2 2020 (provided a second wave of coronavirus doesn’t materialize), and the downturn in the truck market will only amount to 5–10%. He believes that a recovery to the level of 2019 will be possible in 2021, while in 2022, growth can be expected and the volume of the market may amount to 65,000–75,000 trucks a year. Linar Khalitov, CEO of G-Group LLC, commented that demand for residential real estate had already recovered in June, following a decline in April and May. Looking at the future of the market, he said that he doesn’t expect prices to fall in 2020 and 2021, and noted a trend of market consolidation, as a result of which falling supply may mitigate declining demand.

The full version of the online conference is available here: https://events.vedomosti.ru/events/storm/pages/online.

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