Despite the ensuing political uncertainty in Russia, with a presidential election due in weeks and demonstrations on the streets of Moscow, investors are cautiously optimistic about the country’s economic prospects in 2012.
“Investors are also more encouraged by the government’s response to the recent political protests and are becoming more hopeful that we are again at a significant turning point in the country’s development,” Modern Russia contributor and chief strategist at Troika Dialog, Chris Weafer, said in a recent investor note.
“Added to that is the fact of WTO membership and some other concrete examples of reform progress in areas such as capital markets,” he continued.
Weafer also pointed out that Russian investment funds have attracted more investment than any other large emerging market country in 2012, adding, “Real estate, consumer, pharmaceuticals, media, transport and banks offer the best potential returns for 2012.”
Similarly, while Morgan Stanley revised its original growth projections down from 5 percent in 2012 on “weaker-than-expected outturns,” in its 2012 Global Forecast Snapshots report, it also gave a more optimistic outlook for investors than the Russian Ministry of Economic Development and the IMF.
Morgan Stanley’s recent purchase of the Galeria shopping mall complex in St. Petersburg for $1.1 billion – the largest single property sale in Russia – is another indication of the firm’s faith in Russia’s economic outlook.
Meanwhile, Prime Minister Vladimir Putin recently criticized Russia’s poor performance in international investors’ economic indexes. Addressing the Russia Investment Forum in Moscow on February 3, the prime minister and current presidential candidate remarked that while according to the World Bank’s Doing Business Survey Russia is among the top five countries in terms of potential for attracting foreign investments, it is in a “shameful 120th” in terms of investment climate.
The prime minister said the government’s goal is to propel Russia 100 places up the World Bank rankings by increasing protection for SMEs and entrepreneurs from predatory authorities and larger competitors. In order to protect these drivers of innovation, Putin proposed establishing the position of a business ombudsman to review complaints, provide counsel and support entrepreneurs in litigation, while also advising regional and national authorities on business climate issues.
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