analysis-of-key-sectors-of-russia
Published

August 2016

Analysis of Key Sectors of Russia: Infrastructure, Retail, Automobile Market, Tourism, Financial Services (2015-2020)

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Russia, a country riddled with a troubled past, a recent catapult to prosperity, is indisputably a land of opportunities. The leading country in Emerging Europe, Russia is no stranger to international politics affecting its economy. Indeed, the recent annexation of Crimea, a part of Ukraine by Russia has resulted in disgruntled sentiments across the globe, most particularly in the West.

The fall in Ruble registered after the Ukraine crisis has increased cost of imports, inflation, interest rates, recession and joblessness, and an overall slump in the economy. The Russian Trading System, calculated in terms of the US dollars suffered a drop of about 4%. Even with the MICEX having risen by about 2% in this time, investors remain wary and trade continues to be sparse. The current Ruble value of about Ք50 against US$1 is a stark comparison with the average of Ք32 at the start of 2014, registering an average devaluation of about 40% since 2014.

Exacerbating the situation is the drop in price of oil. The Russian economy’s dependence on oil can only be called precarious. Russia has about 87 billion barrels of oil, and about 1163trillion cubic feet of natural gas reserves. Making up about 70% of all export value, and contributing about 30% to the country’s federal budget and a quarter of the GDP, oil’s contribution to Russia’s GDP is projected to further increase to 50% in the coming decades.

It is the increase in global prices of oil that drove the growth of Russian economy between 2000 and 2010, catapulting it to the foremost position in the list of Emerging European countries. The drop of price of oil from US$110 a barrel to about $60 a barrel has resulted in an increase in demand with a simultaneous decrease in investment for new production, leaving the Russian economy vulnerable.

Furthermore, the sanctions enforced by the US moderately impact new exploration and production of shale due to loss of technology Western firms would have introduced, and a more severe restriction on software transfer. While alliances with Asia can solve the latter problem for Russia, over the longer term, its dominance as a world leader reliant on the oil business can be seen diminishing.

However, this also gives the country to strengthen and optimize for output other sectors that have the potential to grow. Markets not closely related to imports have registered only a marginal decline. Despite ranking low on key parameters: 92 out of 112 on Ease of Doing Business, 67 out of 144 on Transparency International, being on the USTR IPR watch list, and being infamous for corruption and unnecessary bureaucracy, Russian markets have much to offer.

A determined drive towards domesticating and localizing production across sectors will account for high growth in the respective domestic industries.

Drivers

Government focus on infrastructural development in transport as well as other sectors in view of the upcoming World Cup 2018 will drive growth in infrastructure. Saturated retail markets in big cities will give way to interior smaller cities. The government’s determined drive to localize production and to increase trade relations with Asia will bring about interesting economic changes.

Constraints

A weakening Rouble, falling investor sentiments, increasing level of sanctions and trade barriers will impact the Russian economy. Furthermore, tighter purse strings will be an effect of the resultant recession, affecting all sectors, from retail to automobiles.

What the report offers

This report will contain micro & macro factors that affect Russia’s market on both Global and Regional scale. It will provide insights pertaining to specified topics and key drivers & restraints for the market particular to each mentioned sector and sub-sector. The report will identify factors instrumental in changing the market scenarios, rising prospective opportunities and identification of key companies which can influence the market on a global and regional scale.

It also contains competition analysis on global & regional scale providing region specific assessments. Competitive landscape will contain profiles of multiple companies along with their strategic initiatives and market shares. Finally, it offers a comprehensive list of key market players along with the analysis of their current strategic interests and key financial information.

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