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June 17 , 2005 AmCham HR Committee Annual Conference

Drivers behind Current Growth in the Russian Economy and Prospects for its Continuation Greg Thain, Chairman, IMS Group. June 17 , 2005 AmCham HR Committee Annual Conference. Russian Economy Today. What they say: More money from oil and gas =>

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June 17 , 2005 AmCham HR Committee Annual Conference

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  1. Drivers behind Current Growth in the Russian Economy and Prospects for its Continuation Greg Thain, Chairman, IMS Group June 17, 2005 AmCham HR Committee Annual Conference

  2. Russian Economy Today • What they say: • More money from oil and gas => • Higher incomes/spending of population and government => • Higher inflation, higher imports => • But GDP growth is slowing down => • 5.2% in the first quarter of 2005, forecasted to be about 6% this year and further slow down in 2006-2007

  3. Russian Economy Today • What we say: • All independent indicators are very strong => • Consumer sector is the primary driver => • Growth in many sectors and areas is underreported => • Macroeconomic stability and government’s fiscal solvency is a major plus => • All businesses we know are growing, investing, making profits • We still believe that Russian GDP will grow 7% plus in 2005 • In the next 3-5 years Russia will be able to maintain significant GDP growth rates (7-8% a year, in real terms)

  4. Drivers of economic growth in Russia • All consumer-related industries • Retail trade and expansion of modern retail formats • Telecommunications, mobile operators, Internet • Construction, real estate • Financial sector: retail banking, insurance, mutual funds • Consumer loans, mortgages • Growth of investments: FDI, investments into the consumer sector, domestic IPOs • Corporate profits

  5. Disposable income Retail turnover Consumer Price Index Drivers of economic growth in Russia: Consumers Real disposable income, retail turnover and inflation, % y-o-y 14,6 11,9 12,0 11,5 10,9 9,2 9,0 9,2 8,9 8,5 8,0 8,0 2000 2001 2002 2003 2004 2005F Source: official statistics, IMS estimates

  6. Drivers of economic growth in Russia: Retail Top 5 Food Retail Chains in Russia, Turnover in USD Million 12 stores 410 stores 1000+ stores 74 stores 72 stores Source: companies’ information, IRG estimates

  7. Drivers of economic growth in Russia: Retail Retail sales of FMCG products in Moscow by outlet type, % Source: PricewaterhouseCoopers, IRG estimates

  8. Drivers of economic growth in Russia: Telecom Russian Mobile and Internet users, Million people (end of period) Source: Public Opinion, UFG, others

  9. Drivers of economic growth in Russia: Construction Construction of housing property, Million square meters Source: official statistics, IMS estimates

  10. Drivers of economic growth in Russia: Banking Corporate loans and retail deposits, USD Billion Source: Central Bank of Russia, IMS estimates

  11. Drivers of economic growth in Russia: Mortgages Mortgage loans to population, USD Million Source: bank’s information, IMS estimates

  12. Drivers of economic growth in Russia: Foreign Investment Foreign Direct Investments into Russia, USD Billion Source: official statistics, IMS estimates

  13. Drivers of economic growth in Russia: Domestic IPOs Funds raised by domestic companies through IPO, USD Million Source: official statistics, IMS estimates

  14. Drivers of economic growth in Russia: Corporate profits Approximately how much has your company increased its annual volume of sales and its annual profit volume from Russia operations in 2004? Source: Survey “Russia: Investment Destination”, FIAC, The PBN Company, Base: 105 major foreign investors in Russia

  15. The Russian economic forecast Main economic indicators, 2004-2006 Source: official statistics, IMS forecast

  16. The Russian economic forecast BRIC Concept by Goldman Sachs • Emerging BRIC countries (Brazil, Russia, India, China) will be the main sector of growth in the world economy in the next 45 years. • By 2040, BRIC economies together will have a bigger GDP than the G7 • An average growth of BRIC is forecasted at 8% in 2005-2050 (in US dollar terms) Source: official statistics, IMS forecast

  17. The Russian economic forecast Nominal GDP by country, USD Billion, 2000-2010 Source: official statistics, IMS forecast

  18. Human capital factor What are the top five advantages of Russia (as an Investment Destination) Source: Survey “Russia: Investment Destination”, FIAC, The PBN Company, Base: 105 major foreign investors in Russia

  19. World Trade Center Krasnopresnenskaya Nab., 12, 6th entrance, office 301 123610, Moscow, Russia Tel.: +7 (095) 258-21-29 Fax: +7 (095) 258-21-30 http://www.ims-group.ru info@ims-group.ru

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