Amid the threat of strong sanctions, Russian business sentiment fell sharply in March to the lowest level in three months.
The MNI Russia Business Indicator fell to 52.5 in March from 60.0 in February,a decline of 12.5% on the month and well below the 59.3 outturn seen in March 2013.
Any positive impact on business confidence at the start of the year from the Sochi Olympics was unwound in March following Russia’s annexation of Crimea, as businesses feared that tough sanctions could be imposed.
Export Orders fell sharply to the lowest level since August 2013, while both Production and New Orders were also down.
At the start of the year, companies had seen the depreciation in the rouble as an increasingly positive factor for their business, but fewer companies reported it as being helpful in March, likely because the speed of decline was a sign of economic instability.
Commenting on the latest survey, Philip Uglow, Chief Economist of MNI Indicators said, “Russia’s actions in Crimea put a significant dent in business confidence in March as concerns grew over the impact on their companies and the wider economy. Businesses dislike uncertainty and our survey shows that companies are feeling the effect of the tension in the region.”
“Russia is paying the economic price for its annexation of Crimea. Growth was already extremely weak, with Russia badly needing to change its growth model and rebalance the economy away from consumption to investment. With capital flowing out of the country they’ve made that job an awful lot harder.”
