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. Last Updated: 07/27/2016

CSFB Offers Upbeat Forecast

With June's pivotal presidential election looming large, a major Western investment bank Thursday sought to get a jump in luring foreign investors into Russia's undercapitalized markets by offering an optimistic outlook for the country's economy.


Some 55 Western portfolio investors flew to Moscow for a two-day investment conference by CS First Boston featuring presentations by senior Russian government officials and executives of top telecommunications, oil, metals and other companies.


"It's encouraging to investors to see how receptive the companies and government officials have been to meeting them," said Peter Halloran, director of equities for CSFB in Moscow.


CSFB's strategy is predicated on an expected boom this summer if President Boris Yeltsin fends off a challenge from Communist Gennady Zyuganov. Equities have surged as Yeltsin has risen in the polls and foreign investors have poured in funds.


But no matter who comes out on top in the race for the Kremlin, Russia would eventually have to return to the path of tight monetary policy and economic reform, CSFB's analysts said.


"Russia's transformation is irreversible," said Sergei Voloboyev, an economist at the bank's European emerging markets division.


CSFB analyst Andrei Arofikin offered two scenarios if Yeltsin is re-elected. One, a "big bang," would see a period of sustained annual economic growth of 5 percent or more and a boom in foreign investment.On the corporate side, a Yeltsin win would be accompanied by enterprise restructuring and strong equity growth.


"Another option [if Yeltsin wins] would be slow progress, which is what's happening now," Arofikin said.


Zyuganov, if elected, would have to struggle between party goals that call for centralized control and economic realities, Arofikin said, predicting that he would likely bow to the necessity of continuing market reforms.


Orthodox communist recipes, if implemented, would ruin the monetary stabilization and emerging recovery, he added, "which means not taking credit for recovery but rather accepting responsibility for a new round of destabilization."


Arofikin said the need to cope with Russia's extensive foreign debt liabilities, high capital flight and the possibility of a suspension of budget support from the International Monetary Fund would ultimately force Zyuganov back on a reform path.