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MACRO ECONOMICS POLICY (308)

Assignment Report
On

GDP, Unemployment & Inflation of Russia

Submitted to:-

PROF. O.P. Bohra

Submitted By:-

ROOPAK GILL - 20130139

RAHUL RANA - 201300134
NIRBHAY - 20130129
PGDM 2013-15
SEC. A

Economy of Russia

Kutuzov Avenue and the Moscow International Business Center

Rank

8th / 6th (PPP)

Currency

Russian ruble (RUB)

Fiscal year

calendar year

Trade

WTO, CIS, APEC, EURASEC, G-20, G8and others

organizations
Statistics
GDP
Cen
tral
ban
k

$2.118 trillion (2013) (nominal; 8th)

$2.556
trillion
Central
Bank
of (2013)
Russia(PPP) (IMF)
$2.022 trillion (2012-2014) (nominal;8th)
$3.386 trillion (2012-2014) (PPP) (WB)

GDP
growth US$3.4%
Inte
497.41
billion
(Source:
IMF;
Data updated: 2012)
(2012)
(1.33%
JanSep.
2013)
rnat
GDP per capita
iona
$14,818 (2013) (nominal)
l
Res
$17,884 (2013) (PPP) (IMF)
erve
s
$14,037 (2012-2014) (nominal)
(2012-2014)
(WB)
Gro
US$$23,589
2.022 trillion
(2011(PPP)
estimate)
GDPss
by sector
agriculture: 4.4% industry: 37.6% services: 58% (2012
Do
mes
est.)
tic
Population
11.2% (Rosstat March 2013 on 2012)
Pro
belowpoverty
duct
line GDP
Labour force
75.5 million (Quarter I, 2013)
Labour
GDP force by
2.511
trillion of4.4%
International
dollars
(2011 58%
estimate)
Agriculture:
Industry: 37.6%
Services:
(2012
(Pur
occupation
est.)
chas
ing
Unemployment
5.4% (June 2013)
Pow
er
Average gross
31,300 Rubles (March 2014)
Parit
salary
y)
Main industries

complete range of mining and extractive industries

producing coal, oil, gas, chemicals, and metals; all forms of
machine building from rolling mills to high-performance
aircraft and space vehicles; defense industries including

Russia Country
Report: GDP data and
GDP forecasts;
economic, financial and
trade information; the
best banks in Russia;
country and population
overview
DATA ON GDP AND
ECONOMIC
INFORMATION

Real
GDP
gro
wth

2001
5.1%

2002
4.7%

2003
7.3%

2004
7.2%

2009
-7.8%

2010
4.3%

2011
4.3%

2012*
4%

2005
6.4%

2006
8.2%

2007
8.5%

2008
5.2%

*Estimate

GDP
per
capi
ta curr
ent
pric
es

US$ 14,246 (2011 estimate)

GDP
per
capi
ta PPP

$17,691 International Dollars (2011 estimate)

GDP
(PP
P) shar
e of
worl
d
tota
l

1980
N/A

Infla
tion
Une

2000
2.67%

**Forecast

GDP
com
posi
tion
by
sect
or
Gro
ss
dom
esti
c
exp
endi
ture
on
R&D
(%
of
GDP
)

1990
N/A

agriculture: 4.2%
industry: 37%
services: 58.9% (2011 estimate)
(Data released on February 2012)

N/A
(Data released on March 2012)

2009
11.7%

2010
6.9%

*Estimate

2009

2010

mpl
oym
ent
rate
Hou
seh
old
savi
ng
rate
s
Publ
ic
deb
t (G
ener
al
gove
rnm
ent
gros
s
debt
as a
% of
GDP
)
Publ
ic
def
cit (
Gen
eral
gove
rnm
ent
net
lendi
ng/b
orro
wing
as a
% of
GDP
)
Gov
ern
men
t
bon
d ra
ting
s
Mar
ket
valu
e of

8.4%

7.5%

*Estimate

N/A
(Data released on December 2011)

2008
7.9%

2009
11%

2010
11.7%

*Estimate

2008
4.9%
*Estimate

2009
-6.3%

2010
-3.5%

**Forecast

Standard & Poor's: BBB

Moody's rating: Baa1
Moody's outlook: STA
(Foreign Currency Government Bond Ratings; Data last updated Dec 2011 and Nov 2012 )

2009
US$861.4 billion

2010
US$1.005 trillion

publ
icly
trad
ed
shar
es

Lar
gest
com
pani
es
in
Rus
sia

UC Rusal (Aluminum), Norilsk Nickel (Diversified Metals & Mining), Polyus Gold
(Diversified Metals & Mining), IDGC Holding (Electric Utilities), RusHydro (Electric
Utilities), Federal Grid (Electric Utilities), Inter Rao (Electric Utilities), Magnit (Food
Retail), Novolipetsk Steel (Iron & Steel), Severstal (Iron & Steel), Mechel (Iron &
Steel), Magnitogorsk Iron & Steel (Iron & Steel), X5 Retail Group (Iron & Steel), TMK
(Iron & Steel), Gazprom (Oil & Gas Operations), Lukoil (Oil & Gas Operations),
Rosneft (Oil & Gas Operations), TNK-BP Holding (Oil & Gas Operations),
Surgutneftegas (Oil & Gas Operations), Tatneft (Oil & Gas Operations), Novatek (Oil
& Gas Operations), Transneft (Oil Services & Equipment), Sberbank (Regional
Banks), VTB Bank (Regional Banks), Bank of Moscow (Regional Banks), Uralkali
(Specialized Chemicals), Sistema JSFC (Telecommunications Services), Rostelecom
(Telecommunications services) (2012)

Overview
Bottom Line: Given Russia's economic and fnancial links to world markets,
sanction decisions need to consider the realistic possibility of contagion.

Conventional wisdom has it that sanctions will impose a cost on Russia, but that absent a
major intensification of the conflict the effects will be concentrated in the region with limited
global impact. To date, sanctions have been modest, targeting a limited number of
individuals, their companies, and small banks. But a set of tougher industry-wide sanctions
affecting finance, energy, and defense are reportedly under consideration.
In part, this belief in limited, regional contagion reflects a relatively sanguine view among
investors about the prospects of an escalation of tensions, a position many in the foreign
policy community do not share. If the probabilities and the implications are hard to measure,
it is not surprising that many in the markets choose not to give much weight

to severe

downside scenarios. That optimism could prove untenable if the darker views of Russian
president Vladimir Putin's plans prove accurate.
In addition, it is often argued that Russia simply is not critical to the global markets. For
example, Goldman Sachs Research argues that despite contributing 3 percent of global gross
domestic product (GDP) and significant energy exports, Russia's limited integration in global
supply chains and international financial markets means "repercussions for the global
economy of current tensions might be relatively small." Their firm's greater concern is that
Russia may respond to sanctions by turning inward. From that perspective, the long-term
isolation of the Russian economy is the primary legacy from sanctions.

These arguments are reflected in current market prices. Though Russian bonds are down 6.9
percent and equities are down 9.6 percent on the year, global equity markets are broadly
unchanged and appear more likely to be moved by industrial country growth and rate
developments rather than shifting information on sanctions. Emerging market spreads are
near historically tight levels, further suggesting delinkage from Russia (and risk appetite from
yield-hungry investors). One can either be comforted by the stability of global markets or
concerned about the prospect of a sharp market correction if these assumptions are
disproved.
Last month I looked at the case for sanctions having a material effect on

What will
matter for
the
contagion
debate is
that the
Russian
market is too
interconnect
ed with the
world to
ignore.

Russia. I argued that the answer was yes, primarily because of Russia's
complex, leveraged, and opaque financial linkages with the West. This
month, I turn the focus to the channels for contagion within and outside
Russia if the conflict intensifies and the West moves to extend sanctions to
entire industries such as energy, finance, or high tech.[1] Sanctions have
never been imposed on a country as large and complex as Russia, making
quantification difficult, but a preliminary assessment suggests effects that
are far more sizeable than indicated by conventional wisdom. It is a mistake
to focus on whether Russia is big enough to matter; what will matter for the
contagion debate is that the Russian market is too interconnected with the
world to ignore. However, policies can be put in place to limit the
dislocations for the West.

Domestic Markets: Tight Macro Policies Magnify Sanctions

Russia's economy already was weakening before the Ukraine crisis. Between 1999 and 2008,
growth averaged 7 percent, but the Russian economic miracle was deflated by the financial
crisis. Activity fell more than 10 percent from 2008 to 2009, and the subsequent recovery has
been disappointing. Sanctions have tipped the Russian economy into recession, with some
forecasts showing that intensified sanctions could result in a sudden stop in capital flows that
would lead Russia's economy to fall 4 percent or more this year.
Russia has limited scope to ease policies to offset a sanctions
shock that cut off its access to global capital markets and
restricted trade. The scope for fiscal expansion is limited by
concerns about inflation and priority military spending, while
monetary policy is constrained by the external weakness and
concern that high inflation could undermine the government's
support with pensioners and the poor. In the face of large-scale
capital outflows, the central bank has raised interest rates twice
and allowed the exchange rate to depreciate. If such pressures

Whether shock
reverberates through
the global economy
depends more on the
economic and
financial channels
through which Russia
is linked with the
West.

continue, Russia does have large amounts of international reserves. Assuming that gold and
three months of imports are untouchable, there is still around $125 billion remaining that
could be spent defending the exchange rate. Nonetheless, with capital outflows of $60 billion
to $70 billion in the first quarter alone, the scope for foreign exchange intervention is limited.
Meanwhile, the central bank is funding state spending through a variety of instruments, such
as infrastructure bonds and joint ventures, potentially crowding out new private sector
lending. This suggests little scope for an easing of policy to offset a sanctions shock.
Channels of International Contagion
The effects of sectoral sanctions for Russian growth could be quite severe. However, whether
that shock reverberates through the global economy depends less on the magnitude of the
Russian recession and more on the economic and financial channels through which Russia is
linked with the West. Though much of the public discussion has focused on critical trade ties,
the prospect of contagion there may be limited, while the financial channels of contagion
have the potential for outsized spillovers.
Global Trade: It's About Commodities
Russian raw materialsenergy, agriculture, metals and miningrepresent the bulk of Russian
exports. Sanctions can block trade in these goods, both directly and through restricting the
financing of this trade, potentially causing disruptions in global production of raw material
intensive manufacturing. Beyond raw materials, however, the links are more limited. Russia
exports few manufactured products to the West. Russian supply chains are dominated by the
former Soviet Union and Russian exports are not critical inputs to Western manufacturing
beyond its role as an energy supplier. Anecdotally, though, some large U.S. manufacturers
fear a disruption of production if rare raw materials for which Russia is a major supplier are
blocked.
Much of the discussion in the press has focused on the effects on the

My base
assumption would
be little or no
change in oil
prices after a
short period of
adjustment.

energy industry, given the importance of Russian exports to Europe. A

cutoff in natural gas exports certainly would create bottlenecks in
supply and a spike in natural gas prices. By some estimates, the
increase in gas prices could be 20 to 40 percent. What would happen to
oil prices? Arguably, the effects would be much smaller, as non-Russian
sources fill the European gap and Russia sells to Asia. Indeed, given the
global nature of oil markets, the end result may be more a reallocation
of oil supplies than a substantial shift in supply. Some economists have

argued that oil prices may even fall if non-Russian producers react to the disruption in
supplies by releasing oil from reserves and pumping more, but it would be unusual to see a
sustained and globally coordinated policy that more than offsets any global shortfall. My base
assumption would be little or no change in oil prices after a few months for markets to adjust.

Finally, the dependence of Russia on oil and gas revenue (65 percent of exports and 35
percent of revenue) leads optimists to suggest that Russia might look elsewhere to retaliate,
particularly if ongoing capital flight continues to pressure international reserves and the
currency.
Financial Linkages: Bigger Than They Seem
I have argued elsewhere that the costs of sanctions will be greatest in the financial arena,
given the high degree of leverage and opacity in Russian financial linkages to the West (Figure
1). First, sanctions and retaliation could force a rapid deleveraging of Russian financial
institutions. This sceario could cause sizeable losses for Russian and international investors,
which would be compounded by the reduction in global risk appetite. Second, a flight to safe
havens might lead Group of Seven (G-7) treasury securities to rally, but risky assets could be
hit globally. Third, financial market sanctions could have dramatic effects not only on Russian
financial institutions but also on the markets in which they operate. For example, Russian
banks hold significant derivative positions and sanctions on those companies could damage
liquidity and market trust.
The high level of uncertainty gives rise to a defacto tax on financial intermediation, which is
another feature exacerbating the contagion from financial sanctions. It is evident from the
sanctions to date that the major effects on Russia stem from concerns that financial ties with
Russian companies could lead to future problems. The high costs of unwinding financial
relations acts as a break on making deals today.
The prospect of financial distress is hard to measure, but the experience with past emerging
market crisis underscores the vulnerability that comes from high levels of debt. Russia has
large external debts (over $700 billion, or 34 percent of GDP), of which two-thirds is public
debt. State-owned enterprises are highly leveraged and dependent on the central bank for
liquidity to fund external asset purchases. Financial sanctions could, by freezing assets,
expose investors to losses on gross rather than net positions. Foreign exposure to Russian
equity is more limited, suggesting that losses in those markets will not have independent and
significant effects on global markets.
Finally, any disruption to payments systems could have cascading consequences. Those of us
of a certain age recall the Christmas treelight problem. If one of the lights malfunctioned, the
entire chain would not work, and it was painful trying to figure out which light was causing the
outage. Similarly, if any U.S. entity is involved in any link of a chain of transactions, the
potential exists for the entire transaction to fail. That is the interconnectedness problem at
the core of sanctions in the complex financial markets we have today.
Figure 1: Costs of Sanctions in the Financial Arena

Sources: Bank for International Settlements, International Monetary Fund

Summing up
It is too sanguine to assume that the effects of sanctions, should they intensify to include
whole sectors of the Russian economy, will be limited to the region. In the end, it is a global
market, and delinking Russia from it will have important implications for all parties. At the
same time, these costs must be weighed against the costs of doing nothing and the risk of
protracted instability. At a time when Russia is testing the existing rules of the international
order, preserving the integrity of the Ukrainian state and supporting its economic and political
reform may tip the balance toward action.

Inflation Russia - consumer price index (CPI)

Graphs - historic inflation

Graph CPI Russia last year

Graph CPI Russia long-term

Most recent CPI Russia (inflation figure) 6.912 %

When we talk about the rate of inflation in Russia, this often refers to the rate of inflation
based on the consumer price index, or CPI for short. The Russian CPI shows the change in
prices of a standard package of goods and services which Russian households purchase for
consumption. In order to measure inflation, an assessment is made of how much the CPI has
risen in percentage terms over a give period compared to the CPI in a preceding period. If
prices have fallen this is called deflation (negative inflation).
This page shows the current and historic CPI inflation figures for Russia.

Tables - current and historic CPI Russia

CPI RU recent months

CPI RU recent years

Other inflation figures

period

inflation

period

inflation

country/region

inflation

period

march 2014

6.912 %

march 2014

6.912 %

CPI BE

0.621 %

april 2014

february 2014

6.200 %

march 2013

7.011 %

CPI JP

1.610 %

march 2014

january 2014

6.079 %

march 2012

3.714 %

CPI RU

6.912 %

march 2014

december 2013

6.480 %

march 2011

9.443 %

CPI NL

1.200 %

april 2014

november 2013

6.487 %

march 2010

6.494 %

CPI US

1.512 %

march 2014

october 2013

6.272 %

march 2009

13.966 %

HICP BE

0.910 %

march 2014

september 2013

6.140 %

march 2008

13.333 %

HICP EUR

0.469 %

march 2014

august 2013

6.522 %

march 2007

7.390 %

HICP FR

0.747 %

march 2014

july 2013

6.452 %

march 2006

10.629 %

HICP GE

0.867 %

march 2014

june 2013

6.907 %

march 2005

13.581 %

HICP NL

0.137 %

march 2014

Inflation Russia 2013

Inflation Russia 2013 (CPI) - The inflation chart and table below feature an overview of the
Russian inflation in 2013: CPI Russia 2013. The inflation rate is based upon the consumer
price index (CPI). The CPI inflation rates in the table are presented both on a monthly basis
(compared to the month before) as well as on a yearly basis (compared to the same month the
year
before).

Using the tabs you can switch between the 2013 CPI inflation overview and the 2013 HICP
inflation overview. In case you are interested in the long term development of the inflation in
Russia (CPI), click here. For the current inflation in Russia (CPI), click here. Following link
provides you with an overview of current inflation by country (CPI).
inflation - CPI

Chart - CPI inflation Russia 2013 (yearly basis)

The average inflation of Russia in 2013: 6.77 %

Inflation in Russia
Welcome to the website dedicated to inflation rate and statistical data in Russia.
Annually and monthly inflation from 1991 till now is represented in a convenient form
of table and charts. Inflation calculators are available on the website to evaluate the inflation
impact on money, prices and to calculate inflation between any two given periods of time.
Current Data
Inflation rate in April 2014 :
Inflation rate year to date, 2014 :
Inflation rate in April 2013 :

0.90%
3.25%
0.51%

Inflation rate in April 2013 year to date :

Inflation rate in 2013 :
Inflation for the last 12 months :
Inflation for the last 60 months (5 years) :

Russia unemployment rate

Unemployment Russia March 2014
Total

Men

Women

< Unemployment 2014-02

Unemployment [+]

5.4%

Russia: Unemployment rate by sex and age

Russia: Unemployment
2013

Unemployment

5.6%

2012

5.1%

Male unemployment

5.3%

Female unemployment

4.8%

2.40%
6.45%
7.33%
38.56%