The Russian textile industry is facing a new crisis due to a decline in demand this year, brought about by ever-increasing prices for local textiles and the low purchasing-power of Russian consumers, business analysts and producers have warned.

According to Anna Lebsack-Kleimans, chief executive of the Fashion Consulting Group, one of Russia’s leading analysis agencies in the textiles and clothing sector, prices for the majority of textile products available in Russia have increased by 20% year-on-year since the beginning of the year and those elevated prices are expected to remain in place into next year.

She said the ongoing increases can be largely explained by the huge tax burden on producers and the weakness of the national currency, the rouble, in recent months.

According to Lebsack-Kleimans’ analysts, the recently approved increase in the rate of VAT from 18% to 20% has created additional pressure on Russian textile manufacturers as it has caused an increase in their production costs. 

Lebsack-Kleimans predicts a further increase in prices in the range of 10%-20% in the premium segment and 10%-15% in the budget sectors of the market by the end of the current year.

“Unlike food prices, the prices for textile products usually grow with some delays, as the increase in the cost of basic products leads to a ‘saving regime’ for local customers, which also affects purchases of new textile products and clothing,” she tells WTiN. “In this regard, many Russian textile producers preferred to restrict the growth of prices in the first half of the current year.”  

Ilya Yaroshenko, president of BAON, another leading Russian textile analysis agency, confirms that the Russian textile market remains highly dependent on the exchange rate.

Yaroshenko tells WTiN: “With the weakening of the rouble and the increase in VAT, the cost of most textile ranges in Russia will inevitably increase.” He predicts prices will rise by at least 10% to 20% for the remainder of 2018.

At the same time, he adds, prices for imported textile products, generally from the European Union, will also rise by an even greater margin – possibly as much as 30% – mainly due to the devaluation of the rouble.

A spokesman for the head of the Russian Association of Textile and Light Industry Producers (Soyzlegprom), a public association uniting key Russian textile producers, says manufacturers are considering various options to try to halt further cost increases.

He says one of the measures involves the return to home shores of textile manufacturers who in recent years have operated from factories abroad, including in Vietnam and China, due to lower labour costs. Now, however, the rising cost of workers in those overseas bases has forced a rethink and production for the domestic market is returning to Russian soil.

The official warns, however, that this will not fully resolve the situation as the majority of raw materials and textile fabrics used by Russian textile manufacturers are still imported from abroad.