Capping what president Vladimir Putin must feel has been a good year for Russia, Moscow’s stock market is one of 2016’s best performers. Despite sanctions restricting banks’ and oil companies’ access to western finance, Russian equities are up about 27 per cent in local currency and 47 per cent in dollar terms.
Yet this recovery is linked almost entirely to short-term external factors rather than long-term fundamentals. Oil prices, Russia’s economic lifeblood, are up about 50 per cent from a year ago. Little surprise, then, that equities and the rouble should have strengthened. Investors are also betting on a “Trump trade” — a deal between Mr Putin and the incoming US president that eases sanctions.
The outlook remains anaemic. Russia is just pulling out of a two-year recession. Output contracted about 0.6 per cent this year. Assuming sanctions remain, international forecasters see economic growth of perhaps 1.2 per cent next year, and 1.5 per cent in 2018 and beyond. That lags behind global growth, the US, and even the EU.