BMI View: We downgraded the outlook for 2015 in the Q3 2015 update due to our in-house Country Riskteam's weaker economic outlook for Russia, particularly the rouble - which we now forecast will weakenfrom an average of RUB38.6/USD in 2014 to an average of RUB58/USD in 2015. This will erode Russianpurchasing power in global markets, hitting demand for consumer electronics devices, but we expect arecovery to begin in 2016 with rouble stabilisation, before an acceleration in growth in 2017. One trendthat we expect to be accelerated by sanctions and heightened price sensitivity is the share of sales capturedby local low cost vendors such as Yota Devices, Explay and FLY, which all made major inroads in terms ofmarket share in 2013 and 2014. Looking beyond short-term crisis, we believe there are positivefundamentals for medium- to long-term growth in consumer electronics spending in Russia, such asrelatively low device penetration rates and income growth. There is downside to our core scenario from thepolitical sphere where tensions between Russia and the US could see the sanctions imposed on Russia inmid-2014 maintained or even extended.
Headline Expenditure Projections
Computer Hardware Sales: USD12.0bn in 2014 to USD7.4bn in 2015, -38% in US dollar terms. Reportsin early 2015 indicate a sharp fall in PC demand in Russia, with rouble depreciation resulting in bothdeferred purchases and a shift to lower value products due to erosion of consumer purchasing power.
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