Business confidence in Russia falls but firms see economy improving

(Business New Europe – bne.eu – Henry Kirby in London – June 22, 2015)

Russia has fallen from the “positive” into the “neutral” expectations range in a Europe-wide study measuring business confidence of companies operating there.

Russia’s score in the Association of European Businesses’ AEB-GfK Index dropped by 9 points from 115 in 2014 to 106 this year, out of a possible 200. While pushing Russia into the “neutral” range, this year’s drop was less pronounced than the 29-point fall seen between 2013 and 2014, when Russia’s score fell from 144 to 115.

The slowing decline in business confidence in Russia suggests that expectations of European companies regarding Russia’s economy have stabilised. This year 22% of companies surveyed said that the economic situation had improved, while in 2014 only 6% said so.

Companies cited ongoing Western sanctions and the depreciation of the ruble as the main factors affecting their ability to operate in Russia. 5% of surveyed companies said their activities fell directly under sanctions, with 16% saying they were partially affected by them. 81% of companies surveyed said they were affected by the ruble’s depreciation.

Aleksander Demidov, managing director of GfK Russia, said that, “after the shock of last year’s spring events and the skyrocketing negative expectations connected with them, European companies have adapted to the new and difficult economic climate in Russia.”