2009 has been a tough year for Russian retailers with the economic downturn trimming demand. RT spoke with Dale Clark PricewaterhouseCoopers Retail & Consumer Practice Leader, about the year.

RT: What is your forecast for 4Q 2009?

DC:  "If we exclude the sales of automobiles, we expect retail sales to increase in Rouble terms by approximately 5%. The reason we exclude automobiles is that in the last quarter of 2008 there was a large increase in sales of vehicles prior to the new customs duties coming into place and that secured total retail sales."

RT: Do you expect a sales boost ahead of New Year 2010?

DC: “We are expecting a boost in sales ahead of the New Year, primarily because the crisis had started last year, having the biggest impact in October – November. This year we expect retail sales in Russia to go up by 10% compared to the same period in 2008.”

RT: What is your forecast for 2010?

DC: "For 2010 we are expecting a slow growth for total retail sales, both in Rouble and US Dollar terms. That’s on the basis that we don’t expect any unusual currency fluctuations and, I think, Russia’s retail market will grow by approximately 3% year on year in 2010.”

RT: Which sectors, do you think, will grow the fastest?

DC: “We are going to see growth in almost all retail sectors, and probably the best way to answer this question is to say which sectors won’t grow well next year. We don’t expect a fast return in luxury and premium sectors, they won’t grow as quickly as medium and discount segments.”

"Durable goods, such as consumer electronics and appliances will continue to have a difficult year in 2010, with real growth coming into that segment only in late 2010. And this is just because of the nature of such purchases which tend to be expensive, and during difficult times people logically hesitate before making such a commitment.”

RT: What factors will have an impact on the retail market in 2010?

DC: “I think consumer confidence will be a key factor next year, because when people are confident about the economy they are more willing to spend. Linked to that will be confidence in the exchange rate and interest rate. If interest rates continue to decline, then some liquidity will come back to the consumer market. This is quite logical because people will be able to repay their current borrowings, and with more money in their pockets, will be able to spend more on other goods.

"Also the consumer interest rate is important, as a person won’t buy a car, for example, if the rate may go up to 25 or 30%. So, uncertainty is going to be a drag on growth for the retail market in 2010. And it will take at least half a year for consumer credits to become available again.”

“2010 should be a better year for everybody with sustainable growth."

RT: What’s your forecast for inflation in 2010?

DC: “The inflation will naturally come down in Russia next year because of stable and declining prices internationally.

"Generally, we tend to agree with the general forecast that the inflation will drop during 2010 and should remain below double digits. That will assist overall growth but not that dramatically.”

RT: What will drive inflation down next year?

DC: “With extremely low inflation in North America and in Europe, any goods imported into Russia – which is a substantial amount – won’t import inflation as well. The pricing increase factors within Russia are substantially reduced. The growth of many supplies are at a very low rate at the moment and the demand for credit sales is extremely low, which drives inflation, and industrial production is very low, so we don’t see producers with capacity constraints increasing prices. So all the factors that would normally drive prices up are not a real risk at the moment, and inflation should come down.

"One of the factors during recent years was a rapid increase in people’s salaries, so there was a lot of salary inflation in Russia. In 2010 it shouldn’t return to the same levels as those prior to the crisis.”

"Lower inflation was also the result of a lower consumer demand as well as lower imported inflation. Also, strengthening Rouble and firm or declining prices in Dollar terms for basic commodities. So, if you look at prices of some commodities, for example agricultural commodities, you’ll see that they’ve been stable over the last 6 months. And as long as those prices don’t increase, Russia won’t suffer from imported inflation."

RT: How will lower inflation influence the retail market?

“Generally speaking, I think, inflation won’t have an impact on Russia’s retail market. Neither positive nor negative.”