Putin's decrees fail to convince investors
Natasha Doff - Moscow News - themoscownews.com - 5.10.12 - JRL 2012-86
President Vladimir Putin hammered home his stated commitment to reforming the economy by signing a string of decrees aimed at boosting investment just hours after his inauguration on Monday.
file photo But the bid was largely ignored by investors, who had one eye on a fresh wave of concern over Europe, and another on who is likely to be chosen to serve in the new Cabinet, due to be announced later this month.
Pre-election goals
The 11 decrees set out many of the long-term economic and social goals put forward by Putin in a series of articles published ahead of his election in early March.
They focus on fairly broad targets, such as the creation of 25 million highly productive jobs by 2020, and moving Russia up 100 places in the ranks of the World Bank's Ease of Doing Business index.
The newly inaugurated president also ordered the government to take measures to raise capital investment and extend an already ambitious privatization program to include the entire non-oil sector (excepting natural monopolies and defense-related companies) by 2016.
The decrees, along with his speech during the inauguration ceremony in which he promised to create a "new economy and modern standards of living," form part of a wider bid by Putin to show that he is serious about implementing economic and social reforms demanded by an increasingly restless population.
Challenging term
Putin faces a difficult six-year term in office, with economic concerns from a slowing global economy and domestic challenges posed by a bolstered opposition at home, which, despite a recent lull in activity, found new energy during protests ahead of the inauguration.
Markets showed little response, however, either to Putin's decreesigning frenzy or to a heavy police crackdown on protesters on May 7, as investors' attention was diverted to a rougher picture on the global market.
Concerns over further trouble in the euro zone caused global oil prices to drop for seven consecutive days this week, hitting a four-month low of $95 a barrel on Thursday.
Cautious optimism
Analysts told The Moscow News that investors are cautiously optimistic about the decrees but are waiting until the new Cabinet is formed later this month before they make any big investment decisions.
"The litmus test will be the announcement of a new Cabinet and how committed the new team will be to reform," said Natalia Orlova, chief economist at Alfa Bank. "Putin has presented his goals, but the question of who will make sure the goals are implemented depends on the composition of the Cabinet."
Orlova added that if the Cabinet decision fails to impress investors, they may develop greater interest in the protest movement, which could be fueled further by an inability of the government to implement the promised reforms.
Investors showed their anxiety about Russian political risk in December, when they pulled funds in a knee-jerk reaction to mass opposition rallies protesting fraud in parliamentary elections.
"Investors are waiting for a list of reforms and a specific list of priorities that may encapsulate a short-term reform program," Yaroslav Lissovolik, economist at Deutsche Bank, told The Moscow News. "This is the biggest question mark for investors and it is something that will probably ultimately decide the overall vector of the stock and financial markets this year."
Keywords: Russia, Economy, Business, Investment, Trade - Russian News - Russia
President Vladimir Putin hammered home his stated commitment to reforming the economy by signing a string of decrees aimed at boosting investment just hours after his inauguration on Monday.
file photo But the bid was largely ignored by investors, who had one eye on a fresh wave of concern over Europe, and another on who is likely to be chosen to serve in the new Cabinet, due to be announced later this month.
Pre-election goals
The 11 decrees set out many of the long-term economic and social goals put forward by Putin in a series of articles published ahead of his election in early March.
They focus on fairly broad targets, such as the creation of 25 million highly productive jobs by 2020, and moving Russia up 100 places in the ranks of the World Bank's Ease of Doing Business index.
The newly inaugurated president also ordered the government to take measures to raise capital investment and extend an already ambitious privatization program to include the entire non-oil sector (excepting natural monopolies and defense-related companies) by 2016.
The decrees, along with his speech during the inauguration ceremony in which he promised to create a "new economy and modern standards of living," form part of a wider bid by Putin to show that he is serious about implementing economic and social reforms demanded by an increasingly restless population.
Challenging term
Putin faces a difficult six-year term in office, with economic concerns from a slowing global economy and domestic challenges posed by a bolstered opposition at home, which, despite a recent lull in activity, found new energy during protests ahead of the inauguration.
Markets showed little response, however, either to Putin's decreesigning frenzy or to a heavy police crackdown on protesters on May 7, as investors' attention was diverted to a rougher picture on the global market.
Concerns over further trouble in the euro zone caused global oil prices to drop for seven consecutive days this week, hitting a four-month low of $95 a barrel on Thursday.
Cautious optimism
Analysts told The Moscow News that investors are cautiously optimistic about the decrees but are waiting until the new Cabinet is formed later this month before they make any big investment decisions.
"The litmus test will be the announcement of a new Cabinet and how committed the new team will be to reform," said Natalia Orlova, chief economist at Alfa Bank. "Putin has presented his goals, but the question of who will make sure the goals are implemented depends on the composition of the Cabinet."
Orlova added that if the Cabinet decision fails to impress investors, they may develop greater interest in the protest movement, which could be fueled further by an inability of the government to implement the promised reforms.
Investors showed their anxiety about Russian political risk in December, when they pulled funds in a knee-jerk reaction to mass opposition rallies protesting fraud in parliamentary elections.
"Investors are waiting for a list of reforms and a specific list of priorities that may encapsulate a short-term reform program," Yaroslav Lissovolik, economist at Deutsche Bank, told The Moscow News. "This is the biggest question mark for investors and it is something that will probably ultimately decide the overall vector of the stock and financial markets this year."