Capital Confidemce Barometer - Russia

Outlook October 2012–April 2013

Capital Confidence Barometer – Russia

Focused on fundamentals

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Our seventh bi-annual Global Capital Confidence Barometer finds Russian respondents substantially less optimistic about the prospects for the global economy than they are about the local economic environment, with many Russian executives expressing a gloomier view across a range of earnings and growth indicators compared with their global counterparts.

Nonetheless, the Russians are far more optimistic about the forecasts of Russia’s own economy — 93% of the Russians regard the local economy as either improving or stable, compared to 84% six months earlier and to 80% in other countries.

Just 13% of Russian executives responding to the October 2012 survey say the global economy is improving, only a third of the number who thought so six months earlier, and a little more than half the number of global respondents who see improvement. However, the number of people expressing negative views also dropped from 38% to 18% during these six months, suggesting a consensual view that the global economy is “stable”. A majority of Russian respondents say they expect the negative climate to continue for another one to two years.

These are the dominant views of the resource industries — the large oil and gas, power and mining companies that make up the overwhelming majority of respondents to the October survey.

Despite the general economic gloom, Russian respondents report that their own companies’ financial positions are more stable than they were six months earlier, with less than one-quarter saying they intend to refinance debt obligations in the next 12 months, down from more than one-third in April. Russian executives also appear to be reducing their leverage rates to a greater extent than their global rivals.

Yet despite relatively low leverage levels, the instability of the global economy is clearly feeding a sense of caution with regards to growth, with less than half of Russian respondents identifying investment in growth as their main focus over the next year, and nearly 40% saying they would use any excess cash to pay down debt over the same period.

Not surprisingly, given this backdrop, a decreasing number of Russian executives express an interest in M&A, with just 13% of Russian respondents saying they expect to pursue acquisitions over the next 12 months.

Key findings

  • 69% view the global economy as “stable”
  • 66% expect the downturn to persist for more than one year
  • 47% see growth as their main focus over the next 12 months
  • Appetite for M&A falls to 13% from 18% in April

Alexei Ivanov, Partner, CIS Transaction Advisory Services Leader