Russia economy impact sectors part 4
February 23, 2008 – 3:33 amFurniture Industry Becoming More Competitive
The export share of official overall furniture production has increased to 15 per cent and amounts to a value of almost US$ 200 million. Major markets are very likely the former southern Soviet Republics of the USSR. Nevertheless, the overall foreign trade balance of furniture produced in Russia continues to be unsatisfactory, running at a deficit.
Furniture Market Framework Data
The Russian furniture market represents one of the successfully developing segments of the consumer market. Despite the limited purchasing power of a large share of the population, furniture sales in Russia have risen by an average of 20 to 25 per cent. According to official figures, individual Russians purchased an annual average of only Euro 15 per head. However, one cannot afford to overlook the dynamic development in incomes described earlier. Thus, the market volume for furniture is always valued taking the so-called “deffered demand” (intention to buy, but finance not yet available) into consideration.
Growing Furniture Imports
According to statistics issued by the Russian Customs Commission, Russia imported furniture to a value of US$ 747.3 million in 2004 (32.5 per cent more than the previous year). Furniture import from non-GUS countries tripled over the past three years. Above all, import of furniture in the lower and middle price classes rose substantially. Compared with the previous year, they increased by 44 per cent in 2004 to reach US$ 539 million. At 28 per cent, a sizeable portion of these imports is represented by furniture from Belo Russia, which, within the scope of the customs union between the two countries, is imported duty free. This high import volume is also an indication that import of furniture from other countries, above all Poland and in certain cases from Germany, are entering the Russian market through Belo Russia.
There have been hardly any changes in the make-up of the countries exporting to Russia. Italy and Germany lead the way with 24.2 and 7.5 per cent, respectively. Imports from Poland (5.6 per cent), Ukraine (5.6 per cent), China (3.4 per cent and growing strongly) and Malaysia (1.3 per cent) continue to rise. Countries such as Spain, Finland and Sweden remain below 3 per cent level. More than 4 per cent of furniture imported is kitchen furniture.
Probable Real Market Volume
In evaluating the true market volume, an assessment must be made of the major share of the so-called “unconsidered market”. This concern in particular both Russian and imported furniture. Estimated carried out by various organizations appraising the market volume at the macro level (Association of Russian Furniture Producing and Timber Processing Industry, Center for the Development of the Furniture Industry) indicate that the true market volume exceeds the statistics mentioned earlier by 1.6 to twice amount. Considering this assessment carried out by the associations, one arrives at import value of US$ 1.2 billion, of which US$ 860 million emanating from non-GUS countries.
Estimated Trading Volume Differs Strongly
According to official statistics, Russia’s total consumption of furniture in2004 was approximately US$ 2.9 billion. Internal sources indicate that about 50 per cent of the furniture traded was the result of imports. Taking the above mentioned corrective values for the production into account, one can assume that the Russian furniture market is currently running at a figure of up to US$ 4 billion. The associations estimate an even higher figure of approximately US$ 5 billion, with the forecast for 2010 reaching US$ 12 billion.
