Business Monitor International


Russia Business Forecast Report

Published 26 August 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

  • The fallout from the Ukraine crisis has worsened the domestic demand outlook in Russia, and we expect real GDP growth to slow to 0.6% y-o-y in 2014, from 1.3% in 2013. With the government taking steps towards fiscal consolidation, net exports will be the main driver of growth in 2014-2015.  

  • Although inflation spiked to 7.8% y-o-y in June, up from 6.1% y-o-y in January, we reiterate our view that inflation will subside by year-end. Subsiding inflationary pressures will allow the Central Bank of Russia to cut the main policy rate from 8.00% to 7.75% in Q115.

  • Rouble weakness will benefit Russia's public finances in 2014-2015, ensuring Russia's budget deficit will remain modest over this time frame. In addition, the government has recently announced plans aimed at fiscal consolidation, which we believe are credible, further bolstering Russia's fiscal accounts outlook over this forecast period.

Major Forecast Changes

  • We have recently revised down our forecast for real GDP growth in Russia for 2014 and 2015 as the fallout from the Ukraine crisis has dampened the outlook for domestic demand to a greater degree than we had previously anticipated. We expect real GDP growth to slow to 0.6% y-o-y in 2014, from 1.3% in 2013. With the government taking steps towards fiscal consolidation, net exports will be the main driver of growth in 2014-2015.

  • Recent developments in Russia have prompted us to slightly modify our forecast for the monetary policy trajectory this year - whereas before we expected a 25 basis points (bps) cut to the Central Bank of Russia's benchmark interest rate by year-end, now this view is likely to materialise in Q115. The CBR governorship appears to be more politically independent and inflation expectations more pronounced than we previously expected.

Risk To Outlook

The retaliatory food export bans imposed by Russia on trade partners in the EU and the US, among others, have presented an upside risk to our inflation and...

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
Foreign Policy
8
Emerging Scenarios: Multi-Month Conflict Ahead
8
Table: Political Overview
8
Long-Term Political Outlook
11
Kremlin Facing Tougher Challenges Over 2014-2024
11
Chapter 2: Economic Outlook
15
SWOT Analysis
15
BMI Economic Risk Ratings
15
Economic Activity
16
Harsher Western Sanctions Darkening Domestic Demand Outlook
16
Table: Economic Activity
16
Fiscal Policy
18
Tentative Steps Towards Fiscal Consolidation Likely
18
Table: Fiscal Policy
18
Monetary Policy
19
Easing No Earlier Than Q115
19
Table: Monetary Policy
19
Balance Of Payments
21
Current Account Expansion In 2014 To Be Short-Lived
21
Table: Current Account
22
Chapter 3: 10-Year Forecast
25
The Russian Economy To 2023
25
After The Ukraine Crisis - Assessing The Damage
25
Table: Long-Term Macroeconomic Forecasts
25
Chapter 4: Business Environment
27
SWOT Analysis
27
BMI Business Environment Risk Ratings
27
Business Environment Outlook
28
Institutions
28
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
28
TABLE: BMI LEGAL FRAMEWORK RATING
29
TABLE: LABOUR FORCE QUALITY
30
Infrastructure
31
TABLE: EMERGING EUROPE - ANNUAL FDI INFLOWS
31
TABLE: TRADE AND INVESTMENT RATINGS
32
Market Orientation
33
Table: Top Export Destinations
34
Operational Risk
35
Chapter 5: Key Sectors
37
Pharmaceuticals & Healthcare
37
table: Pharmaceutical Sales, Historical Data And Forecasts
38
Table: Healthcare Expenditure Trends, Historical Data And Forecasts
39
Table: Government Healthcare Expenditure Trends, Historical Data And Forecasts
39
Table: Private Healthcare Expenditure Trends, Historical Data And Forecasts
39
Telecommunications
42
Table: Telecoms Sector - Mobile - Historical Data & Forecasts
43
Table: Telecoms Sector - Wireline - Historical Data & Forecasts
44
Other Key Sectors
45
table: Oil and Gas Sector Key Indicators
45
table: Defence and Security Sector Key Indicators
45
table: Infrastructure Sector Key Indicators
45
table: Food and Drink Sector Key Indicators
46
table: Autos Sector Key Indicators
46
table: Freight Key Indicators
46
Chapter 6: BMI Global Assumptions
47
Global Outlook
47
US Revision Drags Down Forecast
47
Table: Global Assumptions
47
Table: Developed States, Real GDP GrowtH, %
48
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
48
Table: Emerging Markets, Real GDP Growth, %
49

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-2018, 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-2018.
  • 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 2014-2018?

BMI provides our fully independent 5-year forecasts for Russia through end-2018 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 2014 through to end-2018, 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-2018 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 2009-2013, covering major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2014-2018, 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