Russia to Become Europe’s Second Largest Retail Market

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Feb. 3 – Russia is to become Europe’s second largest retail market with sales in 2011 amounting to US$621 billion, according to Euromonitor International, and may become the largest market in Europe by 2013-2014.

Retail sales in Russia rose 9.5 percent year-on-year in December, compared to 2.6 percent growth in the UK.

Russia’s 6.1 percent annual growth in its consumer price index (CPI) at the end of 2011 was the lowest since 1991, according to the Russian Federal Statistics Service (Rosstat). To compare, the increase was 8.8 percent in 2010.

“Already spending heavily, Russian consumers will soon be spending much more … Because personal taxation is low, with the basic rate at just 13 percent, Russians have disposable incomes close to those in many seemingly much richer West European countries,” Liam Halligan, Prosperity Capital Management (PCM) chief economist, said in the company’s letter to investors.

PCM is the largest manager of Russia-focused funds with about US$5 billion in assets. The company launched The Prosperity Russia Domestic Fund as a closed fund trading on the London alternative market AIM in 2007.

This January, it has opened its US$220 million domestic fund to new large investors as it seeks to take advantage of rapidly-growing Russian retail sales and consumer-focused stocks, Reuters reports.

“Russia’s retail and consumer sector is booming. Profit-margins and revenue growth are high and the sector now commands a very significant share of GDP,” Prosperity Chief Executive Mattias Westman said.

Russia’s retail market is expected to continue development in 2012, reflecting the prevailing trend in terms of GDP growth, according to Euromonitor International.

The research mentioned two main retail trends in the market: stronger domestic companies will develop at faster rates since their weaker partners will be leaving the retail arena and major players of the market will be forced to enter Russia’s lesser-developed regions due to strong competition and high rent in large cities like Moscow and St. Petersburg.

Russian stocks have enjoyed a strong start to the year, with RTS Stock Exchange gains of 12 percent wiping out more than half the losses incurred in 2011.

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