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Economic survey of the current situation on the Russian market. Why it is the best time to enter one of the most attractive markets and start develop your business with Russian partners.

May 31, 2018

The Russian market, with population just under 147 million (as of 2018) and low competition in textiles manufacture and trade compared to European, American and Asian markets, is indeed quite attractive for exporting textile goods.

In the recent year, the Russian economy has stabilized, the currency exchange rate is not experiencing serious fluctuations and oil prices have evened out. In 2018 the GDP showed a record growth index since 2012. According to The Federal State Statistics Service of the Russian Federation, “in 2018 the country showed 2.3% growth in GDP, which exceeded the forecast of The Ministry of Economic Development and Trade of the Russian Federation and Central Bank. This index became the record one since 2012, when the economy had grown by 3.7%”. Minister of Economic Development and Trade of the Russian Federation Maxim Oreshkin said: “Dynamics of financial markets are stable now, Russia has passed the peak of inflation acceleration”.

Achievements of the Russian economy have been marked by the foreign analytics, too. “The growth rate of the Russian economy increased in 2018, while inflation remained low”, - the World Bank said in its January report. The International Monetary Fund raised its forecast for Russia’s GDP in 2019 by 0.3%, to 1.8%. In Bloomberg ranking of developing countries Russia raised from the 7th to the 2nd place, leaving China behind. Speaking about domestic retail markets, “there has been 
improvement in retail trade (up 2.6% in the first half of 2018) as consumer confidence benefited from wage increases (8.8% in the first half of 2018) in the context of the lower inflation rate”
 (European Business in Russia: Position Paper 2019, Association of European Businesses).

Vladimir Putin, President of the Russian Federation, set new goals after inauguration in May 2018: the May decree and 12 approved national projects, that are to increase the level of life and transform economy dramatically.

Of course, achieving such ambitious goals is impossible without extensive financing. In the beginning the authorities made an unpopular step – increase of VAT from 18% to 20%. It will bring more than 600 mln Roubles into the budget annually. This victim is sensitive, yet necessary for the country development.  

Russian textile market
Main textile regions are situated in the Central, Northwestern and Southern Federal Districts. They include such cities as Ivanovo, Saint Petersburg, Tula, Tver, Vladimir, Perm and Vologda. Today around 300 000 people are engaged in the industry with around 14 000 manufacturers of textiles and apparel.

For the past 30 years the situation in the Russian textile market has changed a lot. Today an important distinctive feature of the industry is the progressive unevenness in the distribution of income from the sales of finished products. If a century ago Russian producers of raw materials received up to 50% of revenue, and manufacturers of semi-finished products and accessories took up another 25%, today over 60% of profits are generated by the production of finished goods and the share of raw materials is less than 10%. It is connected with out of date equipment on the factories, slow development of domestic manufacturing of raw materials and accessories. 

As a result, more Russian manufacturers of home textile products opt for combined production. They purchase fabrics and accessories abroad and sew in Russia. Since today Russian consumers value not only prices, but also design and quality, factors like modern materials and new processing technologies become important.

It gives a perfect opportunity for foreign companies to enter the Russian market both with finished products, as products of domestic manufacturers don’t fully cover the market needs, and supply of fabrics and accessories for further manufacture of finished products by Russian companies.

It is confirmed by the announcements, made in November 2018 within the framework of All-Russia Light Industry Forum in Ivanovo. Deputy chairperson of the Government of Ivanovo region (textile center of Russia) Ludmila Dmitrieva announced at the forum, that the region has recently focused on strengthening external economic relations with other countries. Considering this fact, such Italian and Turkish companies as Stellini Textile Group, Mirtex, Dilan Tekstile willingly invest in the textile industry of the region.