MOSCOW Oct 18 The Russian economy will struggle
to return to pre-crisis growth levels in the next few years
because consumer demand will stay weak as people save more and
spend less, Fitch Ratings said on Tuesday.
Consumer demand is the largest driver of Russian growth,
while proceeds from energy exports, another important
contributor, are seen stuck near multi-year lows as a global
glut restrains oil prices.
Presenting Fitch's forecasts for 2016-18, Associate Director
for Consumer and Healthcare Tatiana Bobrovskaya said Russian
consumers would stay focused on keeping costs down.
Some recovery in consumer demand was possible in the low and
middle price segments of the market, she said, but stronger
demand in higher price segments might only be possible from
"The year of 2017 will still be very difficult for retailers
and producers," Bobrovskaya said, adding that consumer
confidence in the third quarter of 2016 remained at "crisis
The economy sank into recession in 2014 after Moscow annexed
Crimea from Ukraine and the West imposed economic sanctions.
Battered by a rapidly depreciating rouble and lower real
disposable incomes, retail sales started falling in annual terms
from early 2015 and were still down 5.1 percent year-on-year in
August this year.
In a presentation on Russia's retail sector in 2017, Fitch
said consumer-facing businesses would also be pressured by
people's tendency to save more and spend less. Savings in Russia
still provide attractive rates of return, with retail banks
offering deposit rates of up to 10 percent.
Such rates, which have been supported by the Russian central
bank only cutting its key rate twice this year, are above
inflation, which is on track to hit a post-Soviet low in annual
terms of 5 to 6 percent for 2016.
Spending activity ran out of steam as the rouble lost around
half of its value since 2014. According to Russia's statistics
service, the average salary stood at 34,095 roubles ($547.93) in
August. That used to be equivalent to more than $1,000 before
the annexation of Crimea.
"The era of consumer demand being the major economic driver
is over. The model of economic growth is changing and exports
and investments will become the major drivers," said Anton
Stroutchenevski, senior economist at Sberbank CIB.
Given high real interest rates, Russia's economic prospects
now seem less positive in the short run, he said. Sberbank CIB
recently lowered its 2017 economic growth forecast to 0.5
percent from 1.0 percent.
That is still more optimistic than the latest government
forecasts, which envisage growth of just 0.2 percent next year.
2017 growth will be accompanied by a 0.6 percent increase in
retail sales, which are expected to contract by 4.6 percent this
year, the Economy Ministry believes.
($1 = 62.2255 roubles)
(Editing by Mark Trevelyan)