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. Last Updated: 07/27/2016

Confidence Steady in November

Overall business confidence held steady in November as the Yukos affair appeared to be finally drawing to a close, a new Ukrainian crisis appeared to be winding up, and the dollar showed signs of falling even further against the ruble and the euro.

The MT Business Confidence Index, compiled from a pool of managers and market watchers, stayed even at 27, the same value as in October. On the MT scale, 10 represents the lowest confidence and 50 the highest. But some of the sub-indices did change: Concerns over legal and tax vulnerability dropped, and respondents said they were more worried about inflation and unemployment.

"In the last year, legal and tax vulnerability have been higher than other concerns, mainly because of the Yukos situation," said one respondent, Alexei Zhuchkov, a financial reporting manager at a Russian oil firm that he asked not be named. "Now this story is in its final phase, business is less concerned about legal and tax vulnerability. They're concerned about the consequences -- inflation, unemployment and business transparency."

Data for the survey were collected between Nov. 16 and Nov. 25. Only a handful of responses were collected after Ukraine's presidential election sparked civil unrest on Russia's doorstep.

The weakening dollar is of particular concern to the business community, respondents said.

Alex Bogantsev, deputy director of the Institute of Business Studies, a business graduate school in Moscow, said IBS was forced to alter its pricing system. Formerly pegged to the dollar, IBS now uses the average between the dollar and the euro.

"For 14 years we had prices in dollars," he said. "Then we started to suffer from the situation."

One respondent, a financial manager working in Moscow who asked not to be named, said overall confidence had not changed from October to November, but faulted the government for not following through on pro-business rhetoric.

"There's been a lot of talk about support for medium-sized and small business, but I cannot see sufficient steps in terms of tax policies, favorable loans or favorable treatment," he said.

Looking ahead, the uproar in Ukraine will likely heighten concerns over political instability in Russia.

"My personal opinion is that this is the biggest foreign policy mistake of the Russian presidential administration ever," Bogantsev said. "It's clear to the majority of Russians that this was a mistake. Confidence in political stability will be less."

The MT index is based on 10 indices measuring attitudes toward issues such as corporate governance, unemployment and inflation. The personal business index, which measures respondents' confidence in their own enterprises, is like the overall confidence index: A score of 10 shows the least confidence, while a score of 50 indicates the most. On the other nine core indices, it is the reverse: At the lowest possible score of 10, no one is worried about it, while at 50 it is on everyone's mind. The index relies on management opinion and is weighted according to the size of the company and position of the respondent.

A pool of 440 managers and market watchers participates in the survey; 85 respondents took part in the latest poll.

Andres Garcia, General director of the Haldor Topsoe branch office in Moscow
"Now even the experts in Yukos are fleeing the country. This I don't like. It means that even people who came to work with Yukos long after the company may have committed the alleged tax fraud also feel endangered. It's like being punished for the sins of the fathers."

Helene Lloyd, Director of consulting firm TMI
"The economy is still doing well if not overheating. However, the political situation has worsened, with worrying authoritarian signs from an ever more interfering government. This is causing nervousness amongst foreign investors and doing little to improve Russia's already tarnished image abroad."

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