Power struggle rages over Russia’s state statistics

A general view of a building of the Federal State Statistics Service (Rosstat) in Moscow. Russia's economy expanded for the first time in two years in the fourth quarter of 2016, data from the state statistics service showed. (AFP)
Updated 03 April 2017

Power struggle rages over Russia’s state statistics

MOSCOW: Reports that Russia’s Economy Ministry is set to take control of the national statistics agency has sparked fears that indicators crucial to monitoring the country’s economic woes could become skewed.

Data from the Rosstat state statistics agency has been key in measuring the extent of the country’s economic crisis, triggered three years ago by tumbling oil prices and Western sanctions over Ukraine, and is thus key to forecasts about when recovery is possible.
With Russians worried about their shrinking purchasing power and a presidential election due next year, perceptions about the economy and its outlook are touchy topics.
Enter into this volatile mix a switch by Rosstat to new calculation methods that are in line with European standards, which has caused rampant confusion inside the agency that has resulted in it publishing reports late and issuing major corrections to its findings.
Widespread issues over the adoption of the new methodology have prompted the government to prepare to make Rosstat — which currently reports to Prime Minister Dmitry Medvedev — answerable to the Economy Ministry in a bid to exercise more control over it, Russian media has reported.
The prime minister’s current oversight is mostly administrative, while the Economy Ministry is responsible for producing forecasts for the government based on Rosstat data.
Analysts fear that as the presidential polls approach Rosstat could come under pressure to produce statistics that would paint a rosy picture of the economy, much as in the Soviet era when authorities used statistics for propaganda purposes, boasting about exceeding production plans.
“This is a pre-election year and if the main socioeconomic indicators are bad, this would look like a lack of respect for the promises” President Vladimir Putin made during his 2012 campaign, said Igor Nikolayev, an analyst at FBK Grant Thornton, an auditing and consulting group.
“If growth reaches 2 percent, then we will say that the sanctions bothered us but all the indicators are now positive,” he added.
Some of Rosstat’s new calculations have proved encouraging for authorities. The agency revised upward its production indicator and calculated that the economy had contracted by only 2.8 percent in 2015 — instead of the 3.7 percent it had previously estimated.
It also said that the economy contracted by only 0.2 percent last year, instead of the 0.6 percent it had previously measured. These changes in Russia’s indicators have transformed the storyline of the country’s economic crisis. With the new figures, Russia’s government can proudly proclaim that the economy has shown unexpected resistance to the double shock of low oil prices and sanctions thanks to a boost to the industry from the weak ruble and dynamic small businesses.
Last month a low indicator for industrial production that was published behind schedule by Rosstat sent a jolt through the Economy Ministry.
Economy Minister Maxim Oreshkin, who took on the position in November, said Rosstat’s transition to its new methodology had been “very unfortunate” and that he expected its figures to undergo “major revisions” while his ministry prepares to announce its forecasts.
In a 2013 report, the Organization for Economic Co-operation and Development (OECD) group of leading economies praised Rosstat’s “high level of professionalism” while saying the agency should improve its methodology for calculating gross domestic product (GDP) and its compliance with international standards.
Former Deputy Economy Minister Alexei Vedev told TASS news agency that Rosstat’s rocky transition to its new methods was the result of resistance by the agency’s ageing staff and the inability to offer attractive wages to young economists.
Changing the supervision of the agency will not solve the problem, Vedev said.
“Our responsibilities will not change with our status,” the head of Rosstat, Alexander Surinov, told Vedomosti business daily, stressing that Russian legislation guarantees the agency’s “professional independence.”
Analysts, however, are skeptical that Rosstat will be able to steer clear of government influence. “The statistics agency must be as independent as possible,” Nikolayev said.
“I have no doubt that a change in leadership will affect Rosstat’s activities, and this will affect the reliability of statistics.”

Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

Updated 16 min 50 sec ago

Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

  • The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios
  • SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year

RIYADH: Saudi Real Estate Refinance Co. (SRC), modelled on US mortgage finance firm Fannie Mae, aims to issue up to 4 billion riyals ($1.07 billion) of long-term sukuk this year, its chief executive said on Tuesday.

The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios from mortgage financing companies and banks to boost the Kingdom’s secondary mortgage market.

SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview.

“Our strategy is clearly to tap the market twice this year,” he said. “We are really looking at probably issuing something between ... 2 and 4 billion riyal that we may be issuing in two tranches.

He said SRC was looking at sukuk in the 10 to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said.

He said the company was assessing whether it could also issue bonds in currencies other than the local riyal.

In March, SRC completed a 750 million riyal sukuk issue with multiple tenors, under a program that allows it to issue up to 11 billion riyals of local currency denominated Islamic bonds.

“The rule of the game for us is, like many projects across the Kingdom, attract liquidity from foreign investors,” Susini said.

He said SRC had spent 1.2 billion riyals from its balance sheet buying mortgages from local mortgage financing companies and provided liquidity to these firms.

It has also signed initial accords with several commercial banks to acquire housing mortgage portfolios.

Saudi Arabia’s housing ministry is targeting the mortgage market to reach a total value of 502 billion riyals by 2020 from around 300 billion riyals now.

The government wants to increase activity in the real estate market as it moves to revitalize the economy and is taking steps to reform the sector as part of its 2030 reform plan.

It has been working with developers and local banks to counter a shortage of affordable housing — one of the country’s biggest social and economic problems. Saudi Arabia wants 60 percent of its nationals to own homes by 2020, up from 47 percent in 2016.

The size of real estate financing relative to its gross domestic product is 5 percent in Saudi Arabia compared to 69 percent in the United States, 74 percent in the United Kingdom and 43 pct in Canada, the housing ministry has said.

“The goal of SRC in this market was to make sure that we will be able to refinance at least around 10 percent of the market in 2020, and 20 percent of the market by 2028,” Susini told Reuters.