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Russia Through a Lens Deloitte Research Centre | 12Th Issue | 3Q 2018

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Russia Through a Lens Deloitte Research Centre | 12Th Issue | 3Q 2018 Russia through a lens Deloitte Research Centre | 12th issue | 3Q 2018 Macroeconomic Media consumption Russian Pharmaceutical Business and Financial outlook in Russia 2018 Market Trends in 2018 Climate in the Far Key Russian macroeconomic Recovery of tolerance Digital strategy: building digital Eastern region indicators in 3Q 2018 for Internet advertising bridges to end consumers Asian markets are a key destination to expand business geography Page 04 Page 18 Page 26 Page 34 Россия: сквозь призму последних событий 02 Russia through a lens Contents We are pleased to present the latest edition of Russia Through a Lens, the macroeconomic 04 18 journal produced by the Deloitte Research Centre in Moscow. Russia in figures Research Centre Macroeconomic outlook market analysis Established in December 2015, the journal (GDP, inflation, trade indicators, • Media consumption is published quarterly and falls under currency rate, Central Bank in Russia 2018 the Research Centre’s monitoring activities. key rate, commodity price • Russian Pharmaceutical dynamics etc.) Market Trends in 2018 In Russia Through a Lens, we focus on current • Business and Financial key trends in the Russian economy and present Climate in the Far our research in the following fields: Eastern region • Russia in Figures – statistical analysis • Research Centre market analysis • Top-5 M&As 40 41 If you have any questions or suggestions Top M&A Global wind regarding this research, please do not Top news: Russia and China hesitate to contact us at: Top news: Russia and Europe [email protected] 42 43 Useful stickers Contacts Designed by the Deloitte Design Group, Moscow 03 Russia through a lens | Russia in figures Russia in figures GDP GDP dynamics 24.6 23.5 24.2 30.2 19.3 13.1 7.3 8.3 5.3 6.8 10.8 6.8 -6.0 3.3 8.5 8.2 5.2 4.5 4.3 3.7 1.8 1.5 1.8 1.6 «For this [economic] cycle, we expect -7.8 0.7 -2.5 -0.2 to get past the lowest growth point in Q1 2019. Among other things, this has to do 108,900 102,000 with higher VAT that will have a one-off 92,037 86,149 83,387 79,200 negative impact. Starting from Q2 or Q3, 73,134 68,164 our growth will continue to pick up.» 60,283 Maxim Oreshkin, 46,309 41,277 38,807 Minister of Economic Development 33,248 26,917 of the Russian Federation * * 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 In January–August 2018, the GDP grew GDP, bln RUB GDP growth, % GDP volume (at current prices) indices, % 1.6% according to the Russian Ministry of Economic Development. In July, the GDP Source: Rosstat, (*forecast) Institute for Economic Forecasting growth rate was 1.8%, but in August of the Russian Academy of Sciences (IEF RAS) it dropped to 1.0%. The deteriorated annual dynamics in agriculture, freight turnover, and manufacturing have contributed to the GDP growth slowdown. In September 2018, Rosstat upgraded Russia’s 1H 2018 GDP growth forecast to 1.7 percent (previously, the growth was estimated at 1.6 percent). Source: “Economic Snapshot. September 2018”, an overview by the Russian Ministry At the same time, the 2H 2018 forecast was increased to 1.9 percent of Economic Development (compared to the previous estimate of 1.8 percent). Q3 GDP (at constant price 2016), bln RUB The Russian Central Bank expects a YoY growth rate of 1.3–1.7 percent for Q3 2018. Source: “Economy: facts, estimates, 23,105 22,921 commentaries. August 2018” (analytical 22,764 22,721 22,332 22,357 22,278 commentaries by the Russian Central Bank). 21,650 21,723 20,610 20,414 19,851 18,872 * 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Rosstat, (*forecast) Central Bank of Russia 04 Russia through a lens | Russia in figures GDP forecasts Source 2018 2019 2020 Source 2018 2019 2020 Economist Intelligence Unit +1.7% +1.8% +1.6% European Commission +1.7% +1.6% - The Ministry of Economic 1.8% +1.3% 2.0% World Bank +1.5% +1.8% +1.8% Development International Monetary Fund (IMF) +1.7% +1.5% +1.5% Central Bank of Russia +1.5% +1.2% +1.8% - - - European Bank for Reconstruction +1.5% +1.5% - +2.0% +1.7% +2.3% and Development IEF RAS +1.8% +1.6% +1.8% Gaidar Institute +1.5% +1.4% +1.6% Standard & Poor’s +1.8% +1.7% +1.7% Organisation for Economic +1.8% +1.6% +0.8% Cooperation and Development Moody’s +1.5% - - Fitch +1.8% +1.5% +1.5% Inflation Inflation rate, % 13.3 12.9 11.9 11.4 9.0 “The inflation risks arising from external 8.8 conditions have come true<...>. 6.6 We expect inflation to be in the range 8.8 5.3 4.0 4.0 of 3.8–4.2% in 2018, in the range 6.5 6.1 5.4 of 5–5.5% in 2019, and turning back 4.3 3.4 3.8 to 4% in 2020.” 2.5 Elvira Nabiullina * * * Governor of the Bank of Russia 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Fact Central Bank Ministry of Economic Development of Russia (*forecast) (*forecast) Inflation rate forecasts Source 2018 2019 2020 Inflation in January–September 2018*: 2.52 percent 3.8% 5.0% 4.0% Central Bank of Russia Inflation target** in 2018: 4.0 percent - - 4.2% 5.5% IMF 3.5% 4.0% 4.0% Vnesheconombank 3.5% 4.0% - *The inflation figure is the consumer price Bloomberg poll (consensus) 2.9% 4.0% - growth rate over the corresponding month of the previous year. (Source: Rosstat) Interfax poll (consensus) 4.0% 4.4% - **The inflation target is set for the consumer Economist Intelligence Unit 3.9% 4.4% 4.2% price growth rate over the corresponding month of the previous year. (Source: Central Bank) 05 Russia through a lens | Russia in figures Trade structure Period: January–July 2018 • Foreign trade turnover: USD 386.1 billion (+21.7% YoY) • Trade balance: surplus of USD 112.2 billion (+USD 40.0 billion YoY) • Exports: USD 249.1 billion (+27.9% YoY) Share of the CIS countries 12.7%, non-CIS countries 87.3% • Imports: USD 136.9 billion (+11.8% YoY) Share of the CIS countries 11.8%, non-CIS countries 88.2% Share of energy products in total exports, % (January 2006 – July 2018) 72.7 73.0 74.5 73.4 70.3 72.4 70.8 68.0 68.0 69.6 66.4 63.2 62.0 55.3 53.0 54.2 47.0 44.0 43.6 42.3 40.9 39.5 35.5 37.1 32.6 33.2 2006 2010 2014 2007 2008 2009 2011 2012 2013 2015 2016 2017 July Jan– 2018 Percentage in Exports Percentage in Exports to non-CIS countries to the CIS countries Source: Federal Customs Service Share of products in total eхports Share of products in total imports to the CIS/non-CIS countries (January–July 2018) from the CIS/non-CIS countries (January–July2018) To non-CIS To the CIS From non-CIS From the CIS countries countries countries countries Energy products 68.0% 37.1% Machinery and auto 50.1% 20.4% Metal products 10.2% 13.0% Chemical products 19.2% 14.3% Chemical products 5.1% 13.2% Food and agriculture products 11.6% 21.6% Machinery and auto 4.1% 16.3% Metal products 5.9% 18.5% Food and agriculture products 4.8% 8.9% Textiles and footwear 6.1% 7.2% Timber, pulp and paper products 3.0% 4.5% Energy products 0.5% 4.4% 06 Russia through a lens | Russia in figures 07 Russia through a lens | Russia in figures Exports (January–July 2018): Percentage of exports In monetary terms In physical terms Categories YoY YoY Energy products 64.2% 31.7% 3.6% 18.2% Kerosene 9.9% Coal 6.3% Natural gas 2.2% Gasoline -10.8% Liquid fuels -8.5% Coke -8.3% Electricity Metal products 10.6% 34.5% 15.4% 32.1% Cast iron 20.0% Copper and copper alloys 14.8% Semi-finished products of iron or non-alloy steel 12.7% Aluminium -10.5% Flat iron non-alloy steel Chemical products 6.1% 14.6% 5.7% 28.8% Products of inorganic chemistry 7.8% Abstergent 3.9% Plastics -0.7% Fertilizers Machinery and auto 5.6% 13.4% n/a 34.8% Electrical equipment 11.3% Ground transportation 2.0% Optical instruments and apparatus 4.9% Trucks 2.1% Passenger cars Food and agriculture 5.3% 31.9% 45.8% products 80.2% Wheat 54.2% Cattle meat Timber, pulp 3.2% 22.2% 2.5% and paper products 9.1% Plywood 5.0% Lumber 2.2% Cellulose -4.5% Rough wood 08 Russia through a lens | Russia in figures Imports (January–July 2018): Percentage of imports In monetary terms In physical terms Categories YoY YoY Energy products 0.9% 7.4% -4.3% Metal products 7.3% 15.2% 14.3% 15.5% Ferrous metals -31.7% Pipes -3.2% Flat rolled products of iron or non-alloy steel Chemical products 18.6% 15.1% 3.6% 11.0% Abstergent 7.4% Rubber 5.4% Plastics 2.7% Inorganic chemistry Machinery and auto 46.8% 10.2% n/a 19.1% Electrical equipment 12.7% Optical instruments and apparatus 3.7% Mechanical equipment 18.8% Passenger cars -4.3% Trucks Food and agriculture 12.7% 7.6% 4.5% products 11.6% Milk 11.3% Citrus 6.3% Cheese and curds -36.9% Meat -33.4% Butter Textiles and footwear 6.2% 14.0% 2.1% 09 Russia through a lens | Russia in figures Currency rate RUB vs.
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