Russia Banking & Financial Services Q3 2018
We continue to hold a positive outlook on the Russian banking and financial service sectors over the medium term aftera lacklustre few years, as the country's economy recovers from its two-year recession. This is on the back of improving economicfundamentals and increasing household disposable incomes as global crude prices trend higher, and as the CBR persists in cleaningup the Russian banking sector. Overall, given that the Russian economy still strongly revolves around the extractives industries,alongside the various existing barriers, the banking and financial services' sectors are expected to remain a very small contributor tothe country's Gross Value Added (GVA) over the next five years. Key structural barriers for sector growth are the EU and US sanctions,the Russian financial sector being largely dominated by state-owned or controlled banks, significant government-imposed barriersto foreign bank participation and the reluctance of many households to channel savings and investments through organised andformal channels. Additionally, while household incomes are expected to improve as the economy performs better, there are still fewhouseholds that fall within the important USD25,000+ category for asset management firms to fully capitalise on, which providesanother impediment to sector growth.
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