Boston, MA -- (SBWIRE) -- 07/13/2012 -- 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 falling external demand, increasing financing constraints and growing political uncertainty.
The report examines how best to maximise returns in the Russian retail market while minimising investment risk, and also explores the impact of major fiscal restraint in the West and the prospect of a hard landing for the Chinese economy to the East on the Russian consumer and on the ability of producers and exporters to realise returns in the short term.
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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 market.
Russian per capita consumer spending is forecast to increase by 77% to 2016, compared with a regional growth average of 59%. 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 more than 210% to US$276.24bn by 2016. This would take MGR's share of the overall food market from 36.3% in 2012 to 67.2% by the end of the forecast period.
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 remains below consensus in its real GDP growth forecast for 2012, projecting economic growth of 3.2% in 2012, well below the 3.7% average Bloomberg consensus forecast, which in our view overstates the outlook for fixed investment and household consumption this year. Although we forecast 3.5% growth in 2013, we caution that risks are to the downside, as more fiscal austerity, social unrest and the risk of major capital shortfalls in Europe's banking sectors could lead to an outright credit freeze over the next 12 to 18 months.
- Having surprised to the upside in 2011, with 6.4% real growth, BMI sees final household consumption growing by 4.3% in 2012, aided by the combination of ongoing disinflation in H112, low unemployment and relatively low household leverage. With the government looking to stabilise its position in power over the course of 2012, this could see further subsidies and demand-supporting government measures put in place over the course of the year. We therefore see private consumption growth climbing moderately to 4.5% in 2013.
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