Belarusian consumer market evolution — 2016

General economic conditions for the consumer market development

2016 was the second year of the socio-economic crisis in Belarus. In 2016 the country’s GDP decreased by 2.4%, in 2015 — by 3.8%.In 2016 the country’s GDP decreased by 2.4%, in 2015 — by 3.8%. With that, real disposable monetary incomes of the population declined much faster than GDP. In 2016, it decreased by 7.3 %, in 2015 – by 5.9 %, i.e. that the reduction of real monetary incomes in 2016 amounted to 12.8 %, if compared to 2014. The crisis phenomena in the economy in 2015-2016 caused certain shock in the population of Belarus; these phenomena ended the 19-years’ period of the sustained growth of economy and retail turnover in 1996-2014. As a result, the population was not able to abandon the existing patterns of consumption quickly and started to spend their savings. This explains the significantly reduced rate of decline in retail trade turnover and public catering, if compared to the rate of decline in GDP or real incomes of the population in 2015-2016. Despite of the fact that the population’s adaptation to the crisis events has taken place, the difference in the rate of decline in monetary income and the rate of decline in the capacity of the consumer market in mid-2016 started to reduce. While in 2015 the decline in the population’s real monetary income outstripped the rate of decline in retail trade turnover and public catering by 4.4 pct, in 2016 it was higher by 3.6 pct.

In 2016, there was a certain recovery in a range of economic activities (industry, agriculture, transport). This suggests that 2017 will be a year of further slowdown in the rate of the GRP decline, if compared to the year 2016; however, the negative pace of the GDP dynamics is likely to remain. The decline in GDP in 2017 is possible due to building construction (lack of investment) and service industry (reduction of monetary incomes of the population). In January 2017 GDP decreased by 0.5%, if compared with the rates in January 2016, and the decline in real wages and pensions continued.
Slowdown in the GDP decline naturally should lead to slowing of the decline of the population’s incomes in 2017. It should be noted, however, that the amount of real monetary incomes of the population is directly influenced by the number of the employed in the economy, which has been shrinking since 2010; this number has decreased during this time by 6.2 % while the population of Belarus has grown over the same period due to positive migration balance by 0.2 %. In 2016 only, the number of the employed in the economy decreased by 82,4 thousand people or by 1.8 %. It is not expected that the consumer market will stabilize automatically, with the slowdown in the rate of the GDP decline. 2017 will probably be the third year of compression of the consumer market of Belarus and of exacerbation of socio-economic problems of the country.

2016 was the year when the Ministry of trade, the main state regulator of the consumer market, acquired new functions. On 8 September 2016 it was renamed in the Ministry of Antimonopoly regulation and trade (MART).

The Ministry integrated such institutes as the Department of price policy of the Ministry of economy as well as antimonopoly and pricing policy administration bodies of regional executive committees and Minsk city executive committee. The new antimonopoly body is responsible for combating monopolistic activity and encouraging of competition on commodity markets, regulation of prices and tariffs, control and regulation of the consumer market, state procurements, advertising activities, and consumer rights protection.
In particular, MART will be to ensure that the share of any trade organization or trade network does not exceed 20% of the retail trade turnover of a unit of administrative-territorial division (city of regional subordination or administrative district), which is provisioned by the law ‘On state regulation of trade and public catering in the Republic of Belarus’. This law came into force on 22 July 2014.

Main tendency of the consumer market development

Further ‘compression’ of the consumer market reasoned by the socio-economic crisis that has been on since 2015 is the main trend of development of the consumer market of Belarus in 2016. The turnover of retail trade and public catering decreased by 3.7 % in 2016 and by 1.5 % in 2015. Acceleration of the decline of monetary income in 2016 in comparison with 2015 and rationalization of consumption patterns of the population in 2016 were the main reasons for the acceleration of ‘compression’ of the consumer market. Due to devaluation of the Belarusian ruble retail trade turnover and public catering for 2016 decreased by 17.0% and amounted to 19.1 billion US dollars (23.0 billion US dollars in 2015)

Slowing the decline in turnover of public catering and accelerating decline in retail trade.
A new trend in the development of the consumer market of Belarus. If compared with 2014, in 2015 the retail trade turnover declined by 1.3 % and the turnover of public catering declined by 5.1 %; if compared with 2015, in 2016 they decreased by 4.1 and 3.2 %, respectively. This can be explained by the fact that food is the most sensitive element of the consumer market, which responds quickly to the slightest fluctuations in the monetary income of the population. If in 2015 the residents of Belarus were saving primarily by reducing their expenses in catering, then in 2016 they started to save on the purchases of goods in the retail system. Multidirectional dynamics of the retail trade and public catering in 2015-2016 reflects presence of various stages in the decline of living standards and the mechanisms of adaptation of the population to these processes.

The increase in the share of food products in retail turnover of trade and catering.
In 2016, the share of food products in the retail trade turnover and catering turnover was 53.6 % (in 2015 – 52.5 %, in 2014 year – 51.6 %). This index is one of the most reliable indicators of living standards. The better people live, the less they spend on food as a percentage from the total retail turnover of trade and catering. The best index for the last 27 years, which amounted to 44.9 %, was observed in 1990. This is the evidence that the living standards of the population in the post-Soviet Belarus were not able to reach the level of 1990.

Increasing of the share of the retail turnover of trade organizations.
By sectors of implementation, the retail trade turnover is divided into two groups: turnover of trade organizations and turnover of trade markets and shopping centers. In 2016, the growth of the shares of trade organizations continued and so did the decrease of the shares of markets and shopping centers in retail trade. This trend has been noted since 2006, and it is largely associated with the ‘squeezing’ of individual entrepreneurs from the consumer market as a result of strict regulation of their activities. In 2016 trade organizations accounted for 85.2 per cent of the total retail trade turnover (and for 81.4 % in 2015). It should be noted that trade statistics considers markets and shopping centers together as a single sector of the implementation but with that shopping centers develop and markets are actively losing their share in the retail turnover.

The intensification of competitive struggle on the consumer market and the increasing role of trade networks and large trade organizations in the retail trade turnover.
In the face of declining purchasing power of the population competition struggle for consumers increases. Thus, the best position will be occupied by organizations of chain retailing (‘Euroopt’, ‘Korona’, ‘Almy’, ‘Rublevsky’, ‘Belmarket’, etc.) and large retail organizations (hyper- and supermarkets) that have the ability to conduct more flexible pricing policy, due to the large volume of trade and the impact on wholesale prices. As a result, in recent years retail chains and large trading organizations have been pushing individual entrepreneurs as well as small and medium-sized trade organizations out of the consumer market. In 2016, large organizations accounted for 66.6% of the total retail turnover of trade organizations (for 66.3 % in 2015). At the beginning of February 2017, food stores of only five abovementioned largest retailers held more than 10.0 % of all retail space in Belarus.

Strengthening of the position of foreign-ownership organizations in retail trade.
The share of foreign-ownership companies in the retail trade turnover of Belarus began to grow particularly fast in the conditions of socio-economic crisis that the country has been facing since 2015. While in 2014 foreign-ownership organizations accounted for 14.9 % of the retail trade turnover, in 2016 this proportion was over 19.6 %. The development of chain retailing companies and construction of hyper- and supermarkets are the main ways of strengthening of the position of foreign-ownership organizations present on the consumer market of Belarus.

Stratification of regions according to the capacity of the consumer market and consumer spending per capita.
Due to the population’s decrease, the number of the employed in the economy and higher pace of decline in wages in small-town and peripheral areas, if compared to the major urban centers, the share of the latter in the capacity of the country’s consumer market is constantly growing. Particularly significant is the capacity of the consumer market of Minsk and regional centers as well as the districts where they are located. In 2016, Minsk and Minsk district only held 37,7 % (34,7 % in 2015) of the retail turnover of trade and catering in Belarus. The share of Minsk and the Minsk district was bigger than the retail turnover of trade and catering of 109 administrative districts with the lowest values of this criterion (there are 118 administrative districts in Belarus altogether). In 2016, the retail turnover of trade and catering per capita in the regions of Belarus differed by 3.6 times (the Minsk district and Minsk and Vetka district of Gomel region). This is the evidence of profound differences in the living standards and quality of life if compared between the regions of the country.

It is possible to learn more about the development of retail trade, public catering, ratings of the regions of Belarus in terms of the population’s consumer expenditures per capita and the capacity of the consumer market in 2016 if you check the section ‘Analytics’.