Waning foreign trade turnover and increasingly closed economy marked Russia’s key ways of getting used to the oil price shock and ruble devaluation in 2014-2015. The ratio of value of exports and imports to GDP dropped from 38% in 2013 to 35% in 2016. The year 2017 is likely to see this indicator revert almost to the pre-crisis level of 37%.
Russia is likely to see further growth in trade turnover with Asian countries, with key risk being economic slowdown in China and ruble strengthening.
That said, amid declining Russian foreign trade, the share of Asian countries in its turnover climbed from 30% in 2013 to 35% in 2016. Notably, this increase was observed both in exports (from 28% to 33%) and imports (from 34% to 38%). Thus, China, Russia’s largest trading partner in Asia, boosted its share in Russian exports from 6.8% to 9.8% in 2013-2016, with imports of Chinese goods showing a similar trend over the period, hopping from 16.8% to 20.9%. In 2017, ACRA expects Russia’s foreign trade turnover with Asia to grow 7.2% to USD 175 bln.
Outstripping economic growth in Asia to boost region’s share in Russian exports
We do not refer to Transcaucasian and Middle East countries as part of Asia.
The metals and mining industry contributed most to growth in Russian exports to Asia (see Figure 1). In price terms, the sector saw its share in Asian exports climb from 8.8% in 2013 to 10% in 2016 – a trend that is likely to continue in the medium term due to both higher margins of the Asian market and increasing equity investments by investors from Asia into Russian companies. Almost all ongoing gas export projects in Russia target the Asian market (Yamal-LNG, Power of Siberia), although a material increase in gas exports to the region should hardly be expected before the 2020s. In 2016, Russia has already deprived Saudi Arabia of its leadership in oil exports to China, and, amid a rapid growth in oil demand in Asia, Russian oil deliveries to the region look set to build up further.
See the ACRA March 28, 2017 research titled “Russian Economy: Recession Knocked Out. What Next?”
The key risk to further building up Russian exports to Asia is deceleration of the Chinese economy, which, by ACRA’s forecasts, should see its GDP climb 5.6% in 2017, but lose pace to 4% by 2021, against an average of 6.8% in 2014-2016. This slowdown stems from waning working-age population and structural reforms in the national economy. That said, even losing some steam, China should still outpace the rest of the globe, while Asia as a whole is expected to remain the fastest growing region on the globe.
A shift to cheaper goods bolstered demand for those coming from Asia
See the ACRA June 6, 2016 research titled “Consumption: absence of growth to be offset by quality change.”
Adapting to ruble devaluation and switching to cheaper goods, Russia has seen Asian presence in its imports on the upside. Products from Asia built their share up from 34% in 2013 to 38% in 2016, with machinery and equipment, Russia’s largest imports item being the key contributor (see Figure 2). In 2016, almost half (49%) of machinery and equipment were imported from Asia (39% in 2013). Consumer goods imports surged on the back of an increasing proportion of food imports from Asia, while the share of Asian clothing, by contrast, shrank from 67.2% in 2013 to 61% in 2016.
By our forecast, Asia will keep on building up its foothold in Russian imports, although less vigorously than now, restrained mainly by ruble strengthening. Thus, our base case scenario outlines that Asian imports could expand their share close to 39-40% by early 2021.
Asian imports are to show the greatest growth of under the negative scenario, which assumes a dramatic decline in both the oil price and Russia’s nominal GDP. In this case the quantity of non-Asian products on the Russian market should fall faster than the number of those imported from Asia, with the latter winning a much greater share in Russian imports, as demand for non-Asian goods is more elastic and sensitive to such changes. Therefore, should the negative scenario materialize, Russians will be forced to save and opt for cheaper Asian and domestic substitutes of more expensive Western goods.
You will receive an email with a link to change your password
Полное использование материалов сайта разрешается только с письменного согласия правообладателя, АКРА (АО). Частичное использование материалов сайта (не более 30% текста статьи) разрешается только при условии указания гиперссылки на непосредственный адрес материала на сайте www.acra-ratings.ru . Гиперссылка должна быть размещена в подзаголовке или в первом абзаце материала. Размер шрифта гиперссылки не должен быть меньше шрифта текста используемого материала.