April 2013 – October 2013

8th Capital Confidence Barometer – Russia

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“Russian companies are significantly more pessimistic about both the international and local economic environments than their global peers, and only a minority express confidence in the ability of the regulatory environment to support businesses at a local level. In addition, the Russian market lacks attractive and reasonably priced investment offers. Perhaps because of these factors, businesses are much more focused on organic growth than they were six months earlier.”

Alexei Ivanov, CIS Transaction Advisory Services Leader, EY

Key findings

  • Russian sentiment about the global economy has declined significantly compared with six months ago, with more than half of respondents (56%) now saying the global economy is declining, in contrast to only 13% of respondents worldwide; the number of respondents (36%) seeing a worsening of the Russian economy has also increased dramatically from 7% in October 2012.
  • 66% of Russian respondents believe that the regulatory environment is supportive of business growth initiatives at the global level while only 44% of respondents believe in regulatory support at the domestic level.
  • The majority of Russians (52%) expect the local economy grow in the range of 1% to 3% in the next 12 months and only 2% believe growth will exceed 5%.
  • 90% of Russian respondents remain confident that access to credit availability is stable or improving, although the number of companies (32%) willing to take on debt to finance deals has fallen sharply.
  • 50% of Russians will focused on growth over the next 12 months that is 3 points increase as compared to October 2012. The number of respondents saying stability is their main priority decreased to 22% from 33% six months ago. Most respondents (72%) identify organic growth as their key focus of excess cash deployment.
  • Appetite for M&A continues to decrease, with just a fraction of those surveyed willing to pursue acquisitions (12%). Companies are primarily focused on margins, profitability and restructuring their debt portfolios than inorganic growth. Further, respondents cite insufficient acquisition opportunities and an unsupportive regulatory environment as the primary obstacles to doing deals.
  • Russian companies (26%) are more likely than their global peers to report plans to sell assets over the next 12 months, reflecting the greater pessimism about the economic climate.