European businesses in Russia see slowdown but still optimistic

By bne IntelliNews June 20, 2013

bne -

European businesses working in Russia did worse over the first three months of this year than they were expecting to, but three-quarters of them still saw revenues rise and expect growth to remain strong over the next three years.

That was the conclusion of the Association of European Businesses' (AEB) annual survey, "Strategies and Prospects of European companies in Russia" that was released on June 19, which it conducts together with the International Institute for Market and Social Research GfK-Rus.

"European companies in Russia hope for the better but are prepared for the worst. Due to the slowdown of the growth of the Russian economy and the influence of the crisis in Europe the top-managers of the companies operating in Russia are less positive towards the current state of their business in Russia and the future than in the previous year," the AEB said in a press release.

The integrated AEB and GfK Rus Barometer Index (which consists of the index of the current state of business and another covering expectations) was 15 points lower than in 2012 at 144 points out of 200.

However, dividing out the current state of play (116) from the future expectations (158) shows that despite the economic slowdown in Russia, European business remains very bullish on the Russian market.

The ongoing crisis in Europe is weighing heavily on the Russian economy, which grew by only 1.6% in the first quarter and saw industrial production come to a standstill. This is going to affect European businesses' investment plans, which are being cut back, the AEB says

"Still, for the long-term period the top-managers of the AEB member companies operating in Russia expect a strong growth," the AEB said. "The companies are also optimistic about the turnover and the margin of their companies. Although fewer companies reported an increase in turnover in 2013 against a year ago - 78% against 87% in 2012 - and despite of the negative beginning of the year, the companies expect the turnover and margin growth in the next 3 years."

Interestingly, while most European businesses were hoping Russia's entry into the WTO would have a positive impact on their business, two-thirds of European businesses report no change in their business from the accession.

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