CEOs’ Opinions & Prognoses

Over the last years, the Russian economy has experienced steady growth, thanks to substantial inflows of foreign investments, increase in domestic production and high energy prices. The same positive trend prevailed in Q1’08, and the economic growth for the year was expected at 6-7%, compared to 2007. However, the growing financial turbulence has proved to be more severe and prolonged than expected. The drastic fall in oil prices, coupled with huge capital flight, decrease in investments and high inflation rate have all negatively impacted on the economy. The good news is that the government is sparing no efforts to stabilize the situation. Thus, we believe the situation will soon return to normalcy, because Russia, being a powerful country, will be able to retain its positive achievements in the economy. 

Company’s achievements in 2008 and plans for 2009

"The favorable economic trends over the past years have provided most Russian companies with a certain safety margin, enabled them to upgrade production facilities and implement a number of large-scale investment projects."

Our business in Russia has been growing at a very high rate, about 30-40% per annum, and this year was not an exception. Our main emphasis was focused on regional development. Thus, TNT now has regional offices in 13 largest cities and plans to establish more regional offices by the end of 2009. Certainly, this crisis has introduced some amendments into our operations. Naturally, we have assessed all the possible economic risks related to this crisis and factored them into our planning strategy. Our services are not so cheap, and therefore, clients must have sound reasons to use them. I mean customers value the quality of our service more than its price, and this represents a substantial competitive advantage, especially at a time when everyone tends to economize. Certainly, it is impossible to avoid the general market decline by reducing business activities. This means reduction in growth rates. Thus, our average annual growth rate, which has been 30-40% in the past years, could fall to 20%. I would like to note our experience in operating in crisis conditions, specifically in 1998, when TNT Express was already on the Russian market. Then, it economized on all things possible, but managed to keep intact the most important asset – human resources, and this enabled it to develop much faster than the market in the post-crisis era. Similarly, we also hope to benefit from the current crisis.

Forecasts on the Russian economy in 2009 

I think the economic growth rates in Russia will decline, but not substantially. Today’s Russia differs from the Russia of 1998. The favorable economic trends over the past years have provided most Russian companies with a certain safety margin, enabled them to upgrade production facilities and implement a number of large-scale investment projects. Certainly, a crisis is a terrible shock for any economic system, and its ongoing consequences pose serious challenges for the CEOs. However, the CEOs, who are able to handle the crisis in the most efficient way and exit it in the shortest time, will certainly get significant competitive advantages. Indeed, most of the so-called anti-crisis measures being adopted today, such as cost optimization, efficient management and intensification of internal control, should be done regularly, but this is not always the case. Also, this is the time to take not only short-term measures, but also to make decisions on a company’s strategic development. Thus, one can say this crisis also provides certain new opportunities that need to be taken advantage in the most appropriate way.