Not much has change in the first two months of this year. Russia’s economy continues to recover and show modest growth, but this is unlikely to accelerate this year to anything beyond 1.5%.

Industry is also recovering with industrial production back in the black, lead by manufacturing. The forward looking PMI index also show that orders are picking up and business owners are much more optimistic about the near term. However, Febraury saw some slowdown in the manufacturing index compared to January so this is not going to be a straight line recovery nor is the momentum going to be strong enough to bowl over obstacles.

Politically Putin’s popularity hit fresh highs in February. More importantly consumer confidence is returning with the polls reporting punters are consider making a big ticket item purchase for the first time in over a year. Real incomes are up modestly, but the real disposable income spiked to expand by 81.% in February, the first expansion in about 18 months. However, the gain was a one off thanks to a one-time pension payment to offset the government’s decision not to index pensions at the rate of inflation last year.

Still, the trend is towards a gradual recovery in real incomes as the CBR continues to win its struggle to contain inflation which dropped below 6% for the first time in modern history in January. Having said that life in the worst regions continues to get tougher.

On the external sector the situation has been improved by oil trading at over $55 for most of the month. This means the budget deficit is containable and will funded by a doubling of domestic bond issues to just over RUB1 trillion this year, of which the first RUB150bn has already been issued.

Russia received  its first positive inflow of capital since October 2015 in January as the balance of payment terms continue to improve on the back of falling debt repayments and higher oil prices, plus a return of foreign investors to the bond and stock markets.

At the micro-economic level things are starting to improve dramatically for the larger companies. Aeroflot just reported its best results ever; Detski Mir, the children’s store, carried off the first IPO in nearly three years and saw its profits quadruple; investment in real estate is up 60%; car sales are expected to grow by 7% for the first time in years;  Moscow reported a strong tax take and tax collection in the indebted regions was up 20%; and the banking sector is reporting rapidly rising profits.

In general a wave of IPOs and bond issues are expected to hit the international capital markets this year, whetting the appetite for more Russian investment irrespective of the politics as investors don’t care about politics.