Domestic production in Russia can be put on its feet only if the ruble is devalued. This was the conclusion made by Andrey Gusev, CEO of STAR Manager Consulting, during a seminar at CPM. Will devaluation be a lifeline for Russian manufacturers?
The forces pushing the pendulum
According to Andrey Gusev's forecasts, the financial situation may destabilize at the end of autumn. This is due to both the crisis of non-payments in the banking sector and a possible drop in oil prices. On the side of the ruble, the rise in oil prices. The main factor playing against the ruble is the fall of the Russian economy. The World Bank said in a very pessimistic tone that in 2009 Russia's GDP will decline by 7,9%, while we are expected to have 12% unemployment.
To stop the decline in GDP, the government will carry out stimulating actions: increase government spending, lower interest rates and weaken the ruble.
It may seem strange that the Russian government is currently playing against the ruble, but Gusev believes that we need to make a reservation here: this game is so far with a touch of neutrality. However, the pressure is increasing, including psychological pressure on specific officials, from whom they expect results - positive growth figures. And if now the Central Bank of Russia is not taking active steps to weaken the ruble against the background of the current situation in the currency and commodity markets, then by the end of autumn we will probably see a different picture.
The significance of the inflation factor, unlike in previous years, is now reduced, and it will not be an obstacle to the second wave of devaluation.
So, the authorities do not want a second devaluation, and as long as oil is expensive, they can afford it. But, on the other hand, it is simply necessary for the rise of the real sector. For confirmation, Gusev turns to the investment company Prospekt: “The main goal of the first wave of devaluation was the need to reduce the impact of imports,” says the Prospekt investment company. “This task was successfully solved, but the second important aspect of devaluation - restoration and launch of production - was not implemented.” Industrial production in case of a sufficient depth of the fall of the Russian currency may start to grow. Gusev himself believes that in the event of a new wave of devaluation, even at the level of 30-40%, cutting off imports is quite realistic. First, imports are currently declining on their own. Secondly, at present, the dollar is cheap relative to world currencies, which will allow the ruble to devalue against the euro during a new stage of devaluation, which, taking into account the structure of imports of the Russian Federation, will significantly reduce imports. The most serious blow will fall on the social sector, primarily on those strata of the population that depend on social payments.
Weighing the pros and cons, we can say that while the scales are inclined to the last option, however, the first one is still worth keeping in mind. What else do you need to pay attention to when planning work for two years in advance.
Key trends of the Russian economy for 2009-2010 years
The end of the "Dutch disease" in the Russian economy. Decline in commodity sectors
The fall in GDP in 2009 by 7-8% with real inflation in 20%. But the "bottom" has already passed!
Budget cuts: regional - by 30-35% of the level of 2008 year, Russian - by 20% of 2008 year
Deficit of national and regional budgets (up to 10% of GDP, GRP) by 2-3 years ahead
Slow reaction of the authorities to the real challenges of the crisis. The situation is developing according to the inertial scenario, but with a smooth transition to dramatic changes in the economy
Lack of real progress to reduce administrative barriers
Banking system saved (IV quarter of 2008 year). By the end of 2010, the number of banks will decrease from 1000 to 500-600
More than 2,5-3 trillion rubles will be invested in projects to support real sectors of the economy (entering capital, replacing loans, infrastructure projects, buying out housing from developers, etc.) for 2 years
There is a forced change of regional authorities and elites (over the next 2 years, 15-20 governors will be replaced)
Prerequisites are being created for creating the ruble currency zone in the territory of the former republics of the USSR.
Clothing Market Prediction
Demand for clothes continues to decline: a decline of one third to half. A third of Russian clothing sellers will not survive the decline in consumer demand and will leave the market by the end of the year, European experts predict. Domestic market participants acknowledge that demand has indeed fallen and will remain unsold until 50% of summer collections. But at the same time, they do not expect mass ruin of players: small and weak traders will leave the market. Against the backdrop of poor sales, rents become unbearable for such retailers: in the busiest places, rental rates have not decreased, but even increased by 30-35%, since contracts are still concluded with reference to the currency. Due to such difficulties, the Stella McCartney and Alexander McQueen boutiques on Kuznetsky Most were closed. Russian players evaluate events differently.
The general director of the Veshch! Chain of stores Olga Eremeeva:
- People began to buy less, we see this both in reducing traffic in shopping centers and in reducing the frequency of purchases, demand fell by 20-25%.
Fashion-director of the company Enrof (Mexx, Calvin Klein, Topshop) Maxima Agakhanov:
- A third of the products of the summer season will not be sold.
Vassa CEO Vyacheslav Granovsky:
- Some of the collections are not sold, but some are sold at a very large discount. And autumn will not bring anything good. A new product will not sell well: people felt a taste for sales. This trend will fully manifest itself in the fall.
The head of the Richemont Luxury Group in Russia Dmitry Eremeev:
- Autumn will be difficult for sellers, since at best they will be able to sell half of the goods of the summer season.
Finn Flare Deputy CEO Anna Sirotkina:
- The market situation is still stabilizing. Companies dispose of stocks, freeing up financial resources for the purchase of new collections. And if our market does not cover the second crisis wave in the fall, then it will be possible to confidently plan future seasons.
Managing Partner of ITMM GmbH Reinhard E. Depfer:
- The volume of retail sales of clothing in Russia will double this year due to a sharp decrease in purchases by Russian importers; the market will enter the growth phase no earlier than 2011 of the year. Given the lack of liquidity, Russian importers reduced their purchases of autumn-winter collections by 40%, and there is reason to predict an even deeper market decline in 2010.
In 2009, the capacity of the Russian clothing market in nominal retail prices will be $ 20,3 billion compared to $ 32 billion in 2008. And if we take into account that 35-40% of the goods will be deposited in warehouses in the form of unsold balances, then the real market volume will be $ 15 billion, that is, it will decrease by 50%.
Russian clothing retail at the beginning of this year experienced a panic and disoriented due to the devaluation of the ruble and a drop in consumer spending on clothing by half, and the situation will not improve next year.
In 2010, the Russian market will drop to the level of 2004 of the year and will be about $ 17 billion. A shortage of clothing supply is not ruled out, since a third of Russian medium-sized clothing retailers will not survive and leave the market.
Only in the 2011 year can one observe growth in sales, which, however, will not exceed 10%. This will be the decisive year for the business: mass restructuring and consolidation of the market will begin, there will be mergers and acquisitions, and from 2013 of the year everything will go up again and the second wave of the retail boom will go.
The Russian clothing retail market is still far from saturated: the average per capita consumption of light industry products in Russia is half that of Germany, so a second boom phase is inevitable.
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