Business Monitor International


Russia Business Forecast Report

Published 28 May 2014

  • 49 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
Russia Business Forecast Report

Core Views

  • We expect inflation to arrive at 5.4% at end-2014, slightly above the Central Bank of Russia's inflation target of 5.0% for 2014, and to average 5.1% in 2015, mainly driven by the government-mandated utility price freeze in 2014-2015. Abating inflation will allow the CBR to cut its main policy rate, from 5.50% at the time of writing to 5.25% in 2014, in a bid to shore up the flagging economy.

  • We forecast the Russian economy to grow by a modest 1.9% in 2014 and 2.2% in 2015, as the main driver of growth over the past decade - household consumption - continues to weaken. At the same time, the demand-side measures taken by the government to boost investment will do little to address the supply-side factors weighing on investment, further reinforcing our expectations for subdued growth for the foreseeable future.

  • The precarious security situation in the North Caucasus poses a major challenge for the Russian authorities, who are at risk of losing control of this vital region. The Kremlin has few good options, and will most likely maintain a combination of repression and federal subsidies, but tough security policies will create a backlash that could undermine its position further.

Major Forecast Changes

  • While we have long maintained a bearish view on the Russian rouble, its recent rapid depreciation has led us to revise further our already downbeat outlook. As such, we have recently adjusted our 2014-2015 outlook for the currency, and now we expect the exchange rate to average RUB35.20/US$ in 2014 from RUB33.16/US$ previously, and RUB35.55/US$ in 2015 from RUB34.10/US$ previously.

Key Risks To Outlook

Unless we see strong moves towards liberalisation of the economy, we remain sceptical that Russia can change its current consumption-centred commodity-dependent growth model into an investment-oriented one. The diminishing windfall from oil and commodity prices will put into sharper relief the structural impediments to investment, such as...

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Ratings
7
Domestic Politics
8
US Trade Sanctions Unlikely Without Invasion
8
Table: Politic al Over view
8
Foreign Policy
9
Russia And The West: Multi-Year Cool Period Ahead
9
Long-Term Political Outlook
13
Political Competition To Increase Over The Next Decade
13
Chapter 2: Economic Outlook
17
SWOT Analysis
17
BMI Economic Risk Ratings
17
Economic Activity
18
Ukraine Crisis Darkening Russia's Growth Outlook
18
table: Economic Activity
18
Fiscal Policy
20
Questionable Long-Term Fiscal Sustainability
20
table: Fiscal policy
20
Monetary Policy
21
Monetary Easing By End-2014
21
table: Monetary Policy
22
Balance Of Payments
23
Current Account Expansion In 2014 To Be Short-Lived
23
table: Current Account
23
Currency Forecast
25
RUB: Tactically Bullish, Strategically Bearish
25
TABLE: BMI CURRENCY FORECAST
25
Chapter 3: 10-Year Forecast
27
The Russian Economy To 2023
27
Major Long-Term Growth Challenges
27
tABLE: Long-Term Macroeconomic Forecasts
27
Chapter 4: Business Environment
29
SWOT Analysis
29
BMI Business Environment Risk Ratings
29
Business Environment Outlook
30
Institutions
30
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
30
TABLE: BMI LEGAL FRAMEWORK RATING
31
TABLE: LA BOUR FORCE QUAL ITY
32
TABLE: EMERGING EUROPE - ANNUAL FDI INFLO WS
33
Infrastructure
34
TABLE: TRADE AND INVESTMENT RATINGS
34
Market Orientation
35
TABLE: Top Export Destinations
36
Market Orientation
37
Chapter 5: Key Sectors
39
Defence
39
TABLE: Defence Expenditure
39
Freight Transport
42
TABLE: Rail Freight
45
TABLE: Road Freight
45
TABLE: Inland Waterw ay Freight
45
TABLE: Air Freight
46
TABLE: Maritime Freight
46
Other Key Sectors
47
table: Oil and Gas Sector Key Indicators
47
table: Telecoms Sector Key Indicators
47
table: Infrastructure Sector Key Indicators
47
table: Food and Drink Sector Key Indicators
48
table: Pharm a Sect or Key Indic ators
48
table: Autos Sector Key Indicators
48
Chapter 6: BMI Global Assumptions
49
Global Outlook
49
Growth Increasingly Polarised
49
Table: Global Assumptions
49
Table: Developed States , Real GDP Growt H, %
50
Table: BMI VERSUS BLOO MBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
50
Table: Emerging Markets , Real GDP Growth , %
51

The Russia Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Russia and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Russia's economic, political and financial prospects through end-2017, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Russia's economic and industry growth through end-2017.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Russia's country risks against regional peers using BMI's country comparative Risk Rankings system.
  • Evaluate external threats to doing business in Russia, including currency volatility, the commodity price boom and protectionist policies.

The Russia Business Forecast Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Business Environment and Key Sector Outlook.

Economic Outlook:

How will the Russia economic policy-making and performance impact on corporate profitability over 2013-2017?

BMI provides our fully independent 5-year forecasts for Russia through end-2017 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Russia Business Forecast Report features BMI's forecasts with supporting analysis for 2013 through to end-2017, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Rankings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector exposure).
  • Global Assumptions - forecasts for each year to end-2017 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Russia and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Russia, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Russia over the next 5-years?

BMI's Russia country Risk Rankings evaluate the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Russia Market - Political Strengths, Weaknesses, Opportunities and Threats facing Russia.
  • Political Stability and Risk Assessment - BMI's Risk Rankings assess explicit short- and long-term risks to political stability; latest ankings, rankings and trends for Russia's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.

Key Benefits

  • Benchmark Russia's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Business Environment

Business Environment Risk Rankings with SWOT Analysis - Business Environment Risk Rankings for Russia, benchmarked against rankings for regional neighbours.

Country Competitiveness - Competitiveness of Russia's business operating environment in supporting corporate growth and profitability, compared with regional neighbours.

Business Environment Contents

  • Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
  • Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
  • Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.

Key Benefits

  • Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
  • Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Rankings.

Key Sector Outlook

Which industry sectors in Russia will grow fastest, and where are the major investment opportunities in the market?

BMI's identifies investment opportunities in Russia's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry with developments over 2008-2012, covering major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2013-2017, using BMI's proprietary industry modeling technique, which incorporates all key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across, and within, each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express