Despite Russia’s current economic woes, the mood among its business leaders attending Davos, the annual world economic forum in Switzerland, is generally positive, comments Alexey Mordashov, ceo of Russian steel and mining group, Severstal. Although there is a certain anxiety about the future of Russia’s economy, “I wouldn’t be too pessimistic,” he recently told reporters in a televised Bloomberg interview.

This is because what is happening in Russia now is a general macro-economic correction, which is very helpful for any national economy, he says. Despite a lot of unpredictability, the current fundamentals could bring Russia to quite a good new equilibrium for growth.

All domestic producers are becoming more competitive because of the rouble’s devaluation, which is also making imports less competitive, he says in the interview monitored by Kallanish. “We have relative financial stability,” and while it’s not easy “we’ve been accustomed to living through reforms for the last 20 years or so. [The situation is] not so dramatic as some people like to make out,” Mordashov told Bloomberg.

Mordashov noted it is difficult to predict the outcome of sanctions, as they are “purely political”. “I hope there will be some unwinding of sanctions, because [they are] very detrimental to everybody worldwide, and especially Russia and Europe”. But, sanctions are having a “rather limited” impact on the economy, he believes, hitting relatively few sectors, like off-shore drilling for oil and gas and the banks, which “are of course much more exposed”.

“I believe this is a relatively temporary situation [and] expect to see a new equilibrium in 2015, which will be a new start.” Nonetheless, the decline of personal purchasing power is the biggest negative in the current situation, he stresses.

While the outlook for global steel consumption has not changed dramatically in the last two months, Mordashov admits that “all these current instabilities, including political instability” have led to a downward revision. “What we see in the world [currently] leads to diminished growth. We expected growth of 2% for 2014, and basically the same for 2015.” This compares with levels of 3.5-3.8% a couple of years ago, he adds.

Regarding the halving of the rouble’s value against the dollar in the last six months, Mordashov also notes that devaluation is not a significant problem for Severstal. “We don’t accumulate [a lot of] foreign currency because, [although] Severstal is a large exporter, we believe our prime market is the domestic market and our focus is Russia.”

Of greater significance is Russia’s trade account, where the price of oil is key. Here Mordashov is also expecting stability. “From what I’ve heard, the new equilibrium for oil prices should be around $50-60-65/barrel.”

Meanwhile, Severstal has a very good liquidity position. “We sold our US operations. Net debt is at 0.8 times [our] ebitda level today. We have more problems how to place cash properly, and because [Severstal group has] no intention to borrow, we are not so much exposed.”

The same cannot be said of other Russian companies, whose borrowing is higher, especially in the non-state sector. Those with significant debt will find it more expensive, “but the government is making efforts to reduce the central bank rate”. So far, credit is not so much an important part of the economy. Overall, Mordashov notes that the Russian government is working on stability.

Mordashov gave this interview at the Davos forum, which took place during 21-24 January.

• S&P downgrades Russia's credit-rating

On 26 January, credit rating agency Standard & Poor's (S&P) lowered its long- and short-term foreign currency sovereign credit ratings on Russia to 'BB+/B' from 'BBB-/A-3'. Russia’s credit rating has been cut to junk, or below investment grade for the first time in a decade, putting the country on an equal footing with Indonesia and Bulgaria, commented observers. This will make it harder for Russia to borrow from investors, they say.

“Russia's monetary policy flexibility has become more limited and its economic growth prospects have weakened,” says S&P. “We also see a heightened risk that external and fiscal buffers will deteriorate due to rising external pressures and increased government support to the economy. We believe that Russia's financial system is weakening. […]  We project that the economy will expand by about 0.5% annually in 2015-2018, below the 2.4% of the previous four years.”