
Sanctions are working: Economic stats show their impact

Most of todays’ data describing macroeconomic situation in Russia, is available up to the end of June, July, and up to early August. That covers the period when first and second rounds of sanctions against individuals and companies close to the Kremlin were in place. The impact on the economy of the third round, commenced with the actions that the United States launched in July 17, is barely reflected in available statistics, and thus will determine the deterioration of economic indicators in the III and IV quarters of this year and later.
The third consequence of the shortage of external financing for Russian banks – is loss of population’s trust. This will manifest in two aspects. First, the rate of deposit base growth decreases, even though population’s income is still growing. If in 2013 the funds on the bank accounts of individuals and legal entities added 14.2% in rubles and 11.5% in other currencies, in the six months of this year, it increased by 1.2% (to 26.8 trillion rubles) and 7.6% (9.8 trillion rubles) respectively. Increase of deposits in hard currency does not compensate for their low increase in rubles. Moreover, deposits of individuals in rubles even decreased by 2.2% (to 13.7 trillion rubles). Second, Russian citizens keep more and more savings in foreign currency under their mattress. If in previous years outflow of foreign cash currency from Russian banks was not major, in the range of $1 billion per quarter, and regularly changing into inflow, in the first half of 2014 the cash outflow totaled $12.1 billion. For Russia it is a big deal, since, unlike Ukraine, Russians have long been measuring all the prices in rubles (expensive goods, cars, real estate) due to the relative stability of the latter, until recently. And a cash outflow of such scale this year indicates deepening distrust of Russians to their banking sector and national currency. This is a first sign of slide-down of local banks to the level of, say, Ukrainian banks (with low-quality balance sheets and regular crises) and the first signs of a general public distrust of government in general.
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