Boston, MA -- (ReleaseWire) -- 05/30/2014 -- BMI View: Risk aversion, capital outflows, a weak rouble and emergency monetary tightening underpin our deteriorating outlook for the Russian economy and - by extension - the domestic power sector. The strong correlation between economic activity and power demand means that the crisis in Ukraine has suppressed our forecasts for the power sector - based on the bleak outlook for investor sentiment and FDI, as well as softening consumer purchasing power.
Our already subdued outlook for Russia's domestic power market has deteriorated further this quarter due to significant downward revisions to our broader economic growth forecasts. Power demand in Russia is highly correlated with economic development and industrial production and a slowdown across the broader economy will lead to weaker growth in the power sector. There were already signs that the economy was weakening in 2013 - weakness that will now be exacerbated by the fallout from Russia's incursion into Ukraine in 2014.
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Investor confidence in Russia has been damaged by the country's involvement in the Ukraine crisis and the implications for the economy and - by extension - the power sector are significant. Although we believe that investors have priced-out the possibility of Russia invading Eastern Ukraine and the West disrupting Russia's trade and capital cross-border flows in retaliation, our Country Risk team now expects real GDP growth of 1.0% in 2014 and 1.5% in 2015, as opposed to previous forecasts of 1.9% and 2.1% respectively.
Specifically, although our core view is that Western sanctions will be little more than symbolic in nature and direct Russian military intervention in Eastern Ukraine is increasingly unlikely, risk aversion has led to major capital outflows from Russia in Q114. As such, the outlook for foreign direct investment (FDI) in Russia is bleak. While we do not anticipate a full-scale exodus of Western capital, planned projects may be delayed as businesses wait for greater political...
The Russia Power Report features Business Monitor International (BMI)'s market assessment and independent forecasts covering electricity generation (coal, gas, oil, nuclear, hydro and non-hydro renewables), electricity consumption, trade, transmission and distribution losses and electricity generating capacity.
The Russia Power Report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing national and multinational operators by sales, market share, investments, projects, partners and expansion strategies.
- Use BMI's independent industry forecasts for Russia to test other views - a key input for successful budgeting and strategic planning in the power market.
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