A friend and colleague points me to remarks made by Prime Minister Victor Zubkov, at a meeting with the management of the Syktyvkar timber processing business:
"You are in great luck - you run your business in the most stable country. The financial crisis [elsewhere] in the world will, of course, affect the operations of many enterprises abroad.
“You work in a stable country, with a stable political system, stable taxes: that is why your business is on the way up"
And who can blame the Russians for enjoying the economic weakness of America, as they also take advantage of US foreign policy log-jam in Iraq?
But two sets of stats out of Russia give pause for thought and remind us that Potemkin economics is never far away, as a risk. Beyond hydrocarbons – whose pricing can be highly volatile if world demand falters on US consumer-led recession, not least in terms of demand for Russian raw materials from China – I think that the big economic risk for Russia 2010-2015 is that the manufacturing base won’t cope with burgeoning demand and that this will see the benefits of consumer demands leak away to overseas manufacturers.
The early signs of this may already have begun, if the Institute for the Economy in Transition is to be believed (noting, of course, that the IET is a vehicle for Yegor Gaidar, whose views are hardly neutral). At the same time, Russian wage inflation continues to soar; way out of kilter to GDP growth.
This is good, at this stage of the election cycle, for the ruling elite to shoe-in Dmitry Medvedev as President, on a landslide victory. In the long term, however, the combination of soaring wages and manufacturing capacity growth seriously lagging behind, leads to structural mess in supply side economics, and doesn’t bode well for President Putin’s laudable, long-term economic ambition: diversification of Russia’s economic base (away from oil, gas and metals).
An increasingly wealthy, free-spending Russian consumer is good electoral politics – and makes the retail sector and retail/warehousing real estate a strong buy – but it may lead to economic gains being lost to ramping inflation.
Now don’t get me wrong. Russia in 2008 will still bring in one of the world’s best GDP growth performances in 2008. But it won’t be entirely unaffected by the recession in the USA and Europe. For the reasons mentioned elsewhere, I would guess GDP growth in 2008 will come in under the Russian government’s forecast of 6.4%: I would say closer to 5%. Inter alia, this does suggest a tighter leash on P/E-led valuations for stocks on the Russian stock exchanges.
Ah yes. The humiliation and fall of UK Conservative MP, Derek Conway (who decided the public purse was a good way of ‘keeping it in the family’ and whose political career began its death tonight).
Some years ago – when he was between seats in Parliament having lost his seat in the 1997 UK General Election, he was casting about for a job in political lobbying. Not getting one he decided to go it alone. At the time he said: “I have met these New Labour Consultants and basically all they know how to do is pour gin & tonic for Peter Mandelson” (approximate quote as I can’t find the original).
He was talking about me.
The prat had come to me for a job and – not thinking much then of his brain or his understanding of what people like me do for clients – I politely sent him on his way. His sneering comments came a week later and, Tory mates at Westminster (I had, and have, a few bizarrely) pointedly said he had me in mind...
Well now, mate, you can pour me a G&T.