Academic journal article Current Politics and Economics of Russia, Eastern and Central Europe

Russian Federation: Exporter Guide*

Academic journal article Current Politics and Economics of Russia, Eastern and Central Europe

Russian Federation: Exporter Guide*

Article excerpt

SECTION I. MARKET OVERVIEW

Opportunities for Future Growth

Russia is one of the fastest growing economies in Europe with approximately 143 million consumers who have developed a strong appetite for quality, Western food products in recent years. Rising incomes and a growing middle class have particularly fueled demand for packaged food, as well as more casual dining options in the foodservice industry. These trends ultimately present great opportunities for U.S. food and beverage exporters looking to enter the large and increasingly advantageous Russian marketplace.

After the notable slowdown in 2009, in 2011 the Russian economy finally reached its pre-crisis level. Gross domestic product (GDP) in 2011 totaled $1,860 billion. This is 4.3 percent growth from 2010 and 0.3 percent growth compared to pre-crisis 2008. The main economic driver for GDP growth in 2011 was increased domestic demand. For example, consumer expenditure per capita totaled $6,447 in 2011 and is forecast to grow by 5 percent in 2012. According to the Ministry of Economic Development (MED), the GDP is forecast to grow by 3.7 percent in 2012, by 4 percent in 2013, and by 4.6 percent in 2014.

While macroeconomic and consumer expenditure indicators are positive, the indicators for average income are less glowing, and thus presents a challenge to businesses trying to sell to middle-income consumers. In 2011, retail sales amounted to $654 billion or up 7 percent year-on-year, accordingto the Russian Federal Statistics Service (Rosstat). Food service sales grew by 6.2 percent and totaled $31 bn. The share of food products in total retail sales in 2011 was 47.8 percent versus 48.6 percent in 2010. Meanwhile real disposable income growth was a mere 0.8 percent despite an increase in real wages of 3.5 percent. Disposable income per capita totaled $7,273 in 2011 and is forecast to rise by 4.4 percent in 2012, according to Euromonitor International. The minimum monthly wage in 2011 stood at US$148 (RUB 4,330). The poverty rate in Russia increased by 0.2 percent and amounted to 12.8 percent of the total population. Although the middle-class has grown substantially, the number is still matched by those living in poverty (please see Appendix Statistics, Table A). The income differentiation gap between the top 10 percent and bottom 10 percent of earners at the end of 2011 was estimated to be approximately 16 times. Unemployment was 6.6 percent in 2011, slightly higher than during the pre- crisis period when unemployment was 5.7 percent (2007). In addition, Russia's savings ratio has been falling in recent years. In 2011, savings amounted to 10.4 percent of disposable income but that is expected to fall to 9.9 percent in 2012.

The Russian government continues to focus on fundamental changes in the country's economic structure over the long term. The economy remains heavily dependent on oil and natural gas exports, which account for two-thirds of export revenues. Their goal is to reduce the economy's dependence on the energy sector.

Russia is also taking a huge step toward joining the global economic trading community. The Russian Federation is due to accede to the World Trade Organization (WTO) in 2012. As part of its WTO accession agreement, Russia has committed to reducing and binding import tariffs to all agricultural goods, thereby providing more predictability on its duties once Russia joins WTO. The average tariff for agricultural products will be reduced from current 13.2 percent to 10.8 percent. For more information on market opportunities please see the following report: http://gain.fas.usda.gov/Recent%20GAIN%20 Publications/Market%20Opportunities%20for%20Key%20U.S.%20Products %20in%20Russia_Moscow

European Russia, geographically west of the Urals, Is home to over 75 percent of the total population (143 million people). 74 percent of Russians in 2011 lived in urban areas and over 8 percent of the total population lived in either Moscow (11. …

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