Recent Evolution of the Economic Context Surrounding Russia

Part 1.Recent Evolution of the Economic context surrounding Russia (2007-2014) J. Vercueil, Vologda, October 2014

1. The international financial crisis (2007-2009) �  First wave : banks directly exposed to the

credit risk (mortgage housing market) �  Second wave : investors in financial

derivatives of subprime credits (SPV, shadow banking), insurance companies

�  Reversal of the « Mark to market » principle �  => « Who is reliable ? ». The problem of the

lender in last resort (Lehman Brothers) � A potential systemic crisis => credit crunch

(first in the interbank market, then in the whole banking activity)

1. Economic Context J. Vercueil, Vologda, October 2014

1. The international financial crisis (2007-2009)

� Preventing the contagion : Governments, Central banks and Financial institutions

� Central banks : intervention on the interbank market, bail out of banks or insurances, help to other central banks, lowering interest rates (when possible)



�  IMF : assistance programs to countries � Governments : public garantees on

deposits, bail out of banks or insurances � Governments : support to the equipment

goods industry

Fiscal Deficits in the World :

Source : FMI (2010)



� How to monitor the recovery of the financial sector ?

�  In the long run, how to re-regulate it ? Examples in the European Union (toward a « Banking Union »)


�  Impact on Trade and Industry �  Trade : -15 % globally in 2009 (against -0,7 % GDP)


Source : FMI (2010)


�  Impact on consumer demand and employment


Source : FMI (2010)


�  In the periphery of Eurozone, specific problems appear :

�  Public debt already high (more than 100 % GDP : Greece, Italy)

�  Housing bubble (Spain, Ireland) => bad loans

�  => Financial and economic crisis : increasing stress on public finances (loss of revenues, increased spending)

�  => rising « spreads »

II. The Sovereign Debt crisis (2010-2013)

Ten Years Government Bonds Yields :


Source : IMF (2014)

�  => New Monetary interventions :

1I. The sovereign debt crisis (2010-2013)

Subprime crisis

Eurozone crisis

Source : IMF (2014)


Source : IMF (2014)

1II…. And Now ? (2013-2014) �  Is the debt burden overcome ?


Source : IMF (2014)

1II…. And Now ? (2013-2014)

� Growth is not over (+3,5 % worldwide) � Diverging economies ? �  Stagnation in Europe and Latin America

(1%) �  Slow down in Asia (6 %) � Volatility in North American and Japan

(between -2 & +3 %)


Source : IMF (2014)

1II…. And Now ? (2013-2014)

�  External factors that usually matter most for Russia :

�  1. Conjuncture in Europe (no improvement ahead)

�  II. Energy prices �  III. Capital flows


Summary �  Six years later, the world economy is still evolving in the

aftermath of the 2008 international financial crisis �  Most important factors shaping the international

conjuncture in the coming monthes : �  Uncertainty over fiscal policies in advanced and

emerging economies (determining anticipations over future demand)

�  Uncertainty over monetary policies in advanced economies (determining available financing sources for credit)

�  Geopolitical tensions (influencing exchange rates fluctuations, trade, commodity prices and FDI)


References FMI (2010) : Perspectives économiques mondiales. Washington, D.C. : Fonds Monétaire International, Octobre 2014.

IMF (2014) : World Economic Outlook. Washington, D.C. : International Monetary Fund, October 2014.


Recent Evolution of the Economic Context Surrounding Russia

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