Even though speculation abounds about the end of the recession in Russia, it is perhaps still too early to claim that the country’s economic woes have reached bottom.

Since the start of the crisis, Russia's economy has adapted to the new reality of low oil prices, the significant decline of the ruble, and the closing of Western markets to borrowers. Photo: RIA Novosti

At a meeting with government ministers devoted to the discussion of economic issues, held in early November, Russian President Vladimir Putin announced that the Russian economy has achieved “the point of equilibrium and balance.”

The Russian President considers that the worst days for the domestic economy are behind us, but much work still lies ahead, aimed at overcoming the consequences of the economic crisis.

“The problem that we now face is more difficult – to restore positive momentum and enter a stage of stable growth, to balance the state budget and maintain the current trend of declining inflation rates,” Vladimir Putin said.

Also read: "Russia prepares for more economic belt-tightening in 2016"

Are there any reasons for optimism?

Thus, the Russian leader, willingly or not, waded into the discussions that have been taking place in the last few weeks in business circles – both in Russia and in other countries. This is the topic of whether the domestic economy has reached its bottom, and whether or not it is now appropriate to talk about the beginning of its slow, but nevertheless upward, rebound.

We can say that during this time, the alarming rhetoric of Russian authorities, regarding the crisis through which our country was going, have started being replaced by rather optimistic statements. The reason for this was the latest data released by the Ministry of Economic Development (MED), according to which in September, Russia’s GDP, taking into account seasonal factors, increased by 0.3 percent compared to August.

Such a monthly increase – even if it is just marginally higher than zero – had not been observed for a long time, and this prompted Alexey Vedev, Deputy Economic Minister to conclude that the bottom of the crisis was over, and that performance will continue to improve in the fourth quarter.

The monthly increase was made possible by positive dynamics in the manufacturing sector. According to the Federal State Statistics Service (Rosstat), industrial output in September grew by 3.4 percent compared to the figures achieved in August. Improvement was observed in the manufacturing sector, which had previously seemed to be in constant decline. In annual terms, the decline in September was lower, 5.4 percent, compared to the 6.8 percent rate in August.

A little earlier, without waiting for official figures, Alexey Ulyukaev, the Minister of Economic Development, had announced that the Russian economy had reached a “fragile bottom, surprising the interested public with this new term.

This optimism of colleagues from the Ministry of Economic Development was shared by the Deputy Minister of Finance Maxim Oreshkin. Just a few days ago, from the rostrum of the representative forum, Mr. Oreshkin confidently declared that the economic crisis in Russia had been left behind, as evidenced by some investment inflow into the national economy, which had been recorded in the third quarter of 2015.

Indeed, according to the Central Bank of Russia, in the third quarter of 2015, the inflow of capital into Russia had amounted to $5.3 billion. It is revealing to note, that the last time a net quarterly inflow of capital into the country was recorded was more than 5 years ago – at the end of the second quarter of 2010. In that five-year period, capital kept only flowing out of Russia.

Moreover, at the end of last year, this outflow had reached a record high, surpassing the $150 billion figure, and during the first nine months this year, capital outflow from Russia was close to $45 billion. However, this cannot be compared with the stampede figures seen in the previous year. By the end of 2015, the Central Bank hopes to keep the outflow in the range of $70 billion.

This quarterly capital inflow is due to the general stabilization of the situation in the financial sphere in the country, said Maxim Oreshkin.

“What we saw this summer, was the opening of foreign markets to Russian borrowers, we saw a number of transactions involving syndicated loans, which allowed the refinancing of debt, and we are now seeing a number of transactions involving the placement of Eurobonds. These are all factors that can reduce the volume of redemptions, thereby reducing the pressure, in terms of capital outflows,” said the Deputy Minister of Finance.

In early November, Finance Minister Anton Siluanov predicted that the Russian economy would bottom out in the fourth quarter of 2015, but that already in the last months of this year, and early next year, we would witness positive growth.

Where will this growth come from? The fact is that, in the little more than a year since the start of the crisis, the Russian economy, even though it has not yet experienced true growth, has to some extent adapted to the new reality of low oil prices (around $50 per barrel), the significant decline of the ruble (60-65 per dollar), and the closing of Western markets to borrowers.

Little by little, the food production sector began to play the role of economic “locomotive,” having been given new focus and emphasis by the food import embargo implemented in August 2014. As a result, during this period, the production of cheese increased by almost 30 percent, meat by 12-13 percent, and fish by 6-7 percent. In short, not all sectors of the domestic economy find themselves on the “minus” side.

Also read: "With its grand past and difficult present, Russia's future still unclear"

Fifty shades of gray in the Russian economy

Of course, all have become tired during the past year and a half of the crisis, watching the depreciation of the ruble, the constantly rising prices on store shelves, the difficulties encountered in finding work, and the level of wages and incomes. Thus, in this sense, the announcements made by high-ranking officials in the economic field can be understood – they are trying, with their statements, to breathe optimism into the population, and into the markets, and into businesses, both big and small.

However, are these responsible authorities not jumping the gun when it comes to diagnosing the end of the recession and the coming economic recovery?

As for the skeptics, they abound in economic circles, and these have their own powerful arguments. For example, the international rating agency Moody’s predicts hard times for Russia in 2016. The belief that next year the Russian Federation will continue to have to deal with economic and political challenges was expressed Kristin Lindow, senior vice president of sovereign risk assessment at Moody’s.

The Russian economy is adjusting to the new reality, and the reality is that oil prices will remain at low levels for a long time,” said Ms. Lindow. Moody’s forecasts negative GDP dynamics for the year 2016. “We believe that the bottom of the recession is approaching, but has not been achieved yet,” said Ms. Lindow.

Igor Nikolaev, Director of the FBK Institute of Strategic Analysis, believes that talking about the economic crisis in the past tense is clearly premature.

“Positive factors that might have an influence on the situation have not been observed yet – not in the area of commodity prices, or in the foreign economic sphere,” the expert noted in an interview with Russia Direct.

“This economic crisis has taken on a protracted character, and it will last at least four to five years, while the economy will face major risks after 2016.”

However, the economy is rarely something that can be painted in one color – white or black. Typically, “fifty shades of gray” appear in it, and objective-minded independent experts did not fail to notice the positive trends that have emerged in the Russian economy this autumn.

Evsey Gurvich, Head of the Economic Expert Group, believes that, in the absence of additional external shocks  such as the collapse of oil prices or an armed conflict, we could see the end of the acute phase of the economic crisis already by the end of this year.

Analysts at Sberbank CIB have noted that the recovery of industrial production and of the manufacturing segment as a whole, recorded in the first month of autumn, is a very encouraging sign.

“It is possible that in September there was a positive turning point, with a recovery in investment activity, loans issuance, and possibly in exports as well,” they believe.

At the same time, analysts at the large international bank Barclays Capital agree with the thesis that the Russian economy has “almost reached the bottom.”

“In general, we believe that the economy is near the bottom of its cycle, and that the recession will not get any more severe,” according to the bank’s research note dedicated to the state of economic affairs in Russia.

After all, economic crises all have a beginning and an end. By the beginning of autumn 2014, the complex phenomena appearing in the Russian economy – recession, international sanctions, falling world oil prices – had turned into a full-blown economic crisis in the country. One would like to believe that the autumn of 2015 would go down in history as the time when this crisis wave was finally swept away.