29 January 2020
Renaissance Capital presents its 2020 Russia macro forecast and markets view

Expects GDP growth above consensus and a dividend-fuelled rally in the equity market

Renaissance Capital, a leading investment bank in emerging and frontier markets, held a press breakfast for top Russian and international media, hosted by Sofya Donets, Economist for Russia & CIS, Renaissance Capital, and Maxim Orlovsky, Managing Director, Markets, Renaissance Capital, on 29 January 2020.  

The press breakfast focused on Sofya Donets’s latest research report The orchestra plays a crescendo – dedicated to Russia 2020 macro forecast – and was complemented by Maxim Orlovsky’s view of the current trends in equity markets and investment banking.  

Sofya maintains that Russia is entering not only a good year, but also a fairly good period, when the accumulated buffers and gains of the long-standing ‘great stabilisation’ policy should translate into strong growth. 

“We expect growth in Russia to more than double to 2.6% YoY in 2020 and stay at 2.5% YoY in 2021. We expect the rebound to be driven by both consumption and investment growth amid monetary and fiscal easing, including an implementation of national projects – fostered by the freshly nominated government – and a reversion of the 2019 VAT hike effect” Sofya elaborated.  

Speaking about monetary policy easing, Sofya pointed out that the largest part of this had already been delivered by end-2019, while in terms of fiscal stance 2020 is likely to become the first year to see the stimulus.

Maxim spoke at length on how lower interest rates on deposits encourage retail customers in Russia to invest in financial markets, predominantly in bonds, where 90% of 2019 retail inflows anchored. He noted that high-yield local bonds are booming, and in addition, a substantial share of trading volumes in Russia nowadays is represented by US equities traded on local exchanges.

He further remarked “Our top-pick Russian equities are O&G majors as well as leading banks. In the M&M sector, we see a mixed performance with ferrous metal producers on a downward trend and the non-ferrous industry very likely to see record highs.” 

“Whatever the landscape is today, we should remember that dividends change everything and make investors forget many things. Amid low interest rates globally, strong dividend payout ratios are likely to become the key investment theme in Russia in 2020 and onwards.”  

In agreement, Sofya added “With the Ministry of Finance staying firm to maintain its 50% ratio target for state-owned companies, we are very likely to see dividend-fuelled growth on the Russian equity market.”