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The Russian Retail Report examines the long-term potential of the local consumer market, but flags shortterm
concerns about the impact on Russia's economic outlook of the risk of capital flight and
overdependence on oil.
The report examines how best to maximise returns in the Russian retail market while minimising
investment risk, and also explores the impact of the ongoing crisis in the country's main export market,
Europe, on the Russian consumer and on the ability of producers and exporters to realise returns in the
The report also analyses the growth and risk management strategies being employed by the leading
players in the Russian retail sector, as they seek to maximise the growth opportunities offered by the local
Russian per capita consumer spending is forecast to increase by 44% between 2013 and 2016, compared
with a regional growth average of 33%. The country comes third in BMI's Central and Eastern Europe
(CEE) Retail Risk/Reward Ratings, although it underperforms significantly for Risk.
Among all retail categories, mass grocery retail (MGR) will be the outperformer through to 2016 in
growth terms, with sales forecast to grow much faster than overall food sales throughout the forecast
period, by almost 132% to US$231.46bn by 2016. This would take MGR's share of the overall food
market from 42.1% in 2013 to 80.8% by 2016.
In the competitive arena, BMI sees upside potential in the fact that the Russian government
has committed to spending billions on infrastructure over the next 10 years, particularly
railroads and highways, which should translate to better logistics for expanding retailers.
Over the last quarter, BMI has revised the following forecasts/views:
BMI's below-consensus forecast for Russia's 2012 real GDP growth of 3.4% appears to be well
placed as leading indicators point towards a further slowdown in economic growth. We have
revised down our forecast for 2013 real GDP growth in Russia to 3.4% from 3.6% previously.
This comes on the heels of a stark shift by the central bank towards monetary policy tightening,
a bias we expect to remain intact over the coming months.
BMI's expectation for private consumption to weaken going into 2013 underpins our view for
weaker headline growth. Private consumption has been a key driver of economic growth in
Russia over the past two years. Falling unemployment and rising disposable incomes have seen
household consumption growth average 7.0% year-on-year (y-o-y) in H112, up from 6.1% in the
same period of 2011. However, going forward, tighter access to credit, via higher interest rates
and the likelihood of more prudent lending practices by banks, will translate to weaker
Leading indicators suggest that these dynamics have already begun to feed through to weaker
consumption - real retail trade slowed into H212, coming in at 4.4% y-o-y in August, down
substantially from the 7.4 % racked up back in January. As a result of these combined dynamics,
we forecast private consumption to increase by 4.2% in 2013, down from our forecast of 4.9% in