Page 39 - BNE_magazine_06_2020 Growers

bne June 2020 Central Europe I 39
saw the price of oil tumble, and Russians are well aware that the value of the ruble will tumble in tandem. In times of crisis Russians rush to dump their rubles in an effort to minimise their losses.
Retail demand was very strong in March, the last month before the coronavirus epidemic hit. Retail sales growth accelerated to +5.6% year on year, from +4.6% y/y in February when real wages rose +5.7% y/y.
The scale of the pick up in retail sales in March was very similar to the surge in retail sales in December 2014, when the last oil shock hit. However, the structure of spending this time was very different: this year Russians rushed out to buy food as coronavirus fear rapidly mounted, whereas in 2014
they stocked up on non-food durables, which is the classic anti-crisis strategy to lock up value.
The April retail numbers are not out yet but analysts widely anticipate a sharp fall, as both mobility and real incomes will have taken a bath that month.
Russia’s Business Ombudsman, Boris Titov, said during an online conference on May 6 he expects consumer demand in Russia to decline 10-15% in 2020 due to the coronavirus pandemic.
“We expect that countrywide, real wages will fall. This applies primarily to the private sector, but also in the segment financed from the budget, wages will be reduced. Therefore, [we will lose] 10-15% of demand at least this year,” he said.
Russia Watcom shopping index
And the early indicators bear that prediction out – and suggest it might
be even worse. The Watcom shopping index, which measures foot traffic in real time in the biggest malls in Moscow, crashed in week 13 of this year, falling to its lowest level on record.
Likewise, Watcom’s daily foot tracker monitor shows that traffic in the top malls in Moscow and St Petersburg is down by 70-75% y/y as punters shy away from the shops, or are simply forbidden from going out.
Consumer demand may take three years to recover from the crisis, according to
a study by the Boston Consulting Group (BCG) and Romir Holding. The decline in Russian consumer markets spans
90% of all goods and services and is not easily shaken off. Unless there is a sharp rebound then consumers are expected to keep cutting their spending for at least six months until it is clear the crisis is over.
In the coming six months 15% of Russian consumers expect their incomes to decline further, the third worst result globally after Italy (18%) and the
US (16%), according to analysts and retailers surveyed by Kommersant.
Ukraine
Ukraine has had it even tougher. The economy has only just emerged from
a deep recession caused by the economic dislocation of the Euromaidan revolution in 2015, which saw economic growth collapse by 17% in the first quarter of 2015.
Incomes remain amongst the very lowest in Europe, but with economic growth beginning to gather some modest momentum in 2019 they had finally started to rise again as inflation began to fall rapidly in the first quarter of this year, feeding through to retail sales.
That all ended abruptly in March as retail sales crashed as twin whammies of the oil price shock and retail turnover fell from a 13.5% expansion in February to 6.1% in March as the virus arrived in Ukraine. After the country was put on lockdown they will fall again in April.
Ukraine retail sales advanced 10.6% y/y in real terms in 1Q20, slowing from 13.5% y/y in 2M20, Ukraine’s State Statistics Service reported on April 21.
Belarus
Belarus has been doing its best to ignore the coronavirus crisis as Belarus President Alexander Lukashenko has refused to take it seriously. Instead
of locking the country down, the strongman leader advised his citizens to wash their hands with vodka, “and maybe drink a little, but not more than 40-50g and never at work!” The result has been a predictable disaster as infection rates have soared unchecked.
Like the other countries the April numbers are not out yet, but retail sales were already in free fall in March. Like Russia, with which Belarus’ economy
is closely tied, retail sales had been building in the first two months of this year, rising from 2.3% in December 2019 to reach 8.8% expansion in February this year, according to the national statistic agency. However, by the end of March they had tumbled to post a 10.5% contraction – by far the worst result in the region. Both Russia and Ukraine saw sharp slowdowns in retail turnover in March, but in both countries retail was still growing y/y.
The outlook for Belarus is now uncertain and its fate remains tied to that of Russia, where things are expected to get worse before they get better.
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