OLGA IZRYADNOVA: “ECONOMIC REVIVAL IN RUSSIA CONTINUES”
In its latest issue that focused on the development dynamics and prospects of the Russian economy, The Expert published a commentary by Olga Izryadnova, Head of the Gaidar Institute’s Structural Policy Department.
The Expert states that a revival has continued in the Russian economy. According to Rosstat data, the industrial production index in May increased by 1.1% on the previous month. Indirect industrial activity indicators, such as electricity consumption and transport turnover, have also been pointing to an ongoing economic recovery.
The sentiments across the business community are also very optimistic: the entrepreneurial confidence indices in both the extractive and manufacturing industries have returned to their pre-pandemic levels. If we look at the by-industry components of the industrial production index, significant variances will become obvious. Thus, for example, the industrial production index in the mineral extraction sector lost 0.8% over 2 years.
However, the problems are not limited to those dealing with oil production: the metal smelting sector has also reduced its output compared to 2019. And finally, the production of goods to satisfy investment demand has been growing rather slowly, by only 3.6% over 2 years. Moreover, for 2 months in a row it has been declining at a rather significant rate (-3.5% in April, and -3.1% in May). The ongoing growth in imports of investment goods has been the only result that can be characterized as relatively reassuring.
“The explosive growth in demand for pharmaceuticals and sanitary materials boosted the inputs of intermediate and final medical goods and the products of related industries belonging to the machine-building, chemical and timber processing complexes, as well as the products of the textile and clothing industries. The movement patterns of the production of everyday consumer goods were also shaped by the changes in consumer behavior triggered by the altered rhythm and lifestyle during the lockdown and remote work periods,” Olga Izryadnova explained.
Another risk factor that works against continued industrial growth is the expected increase in wages.
According to the Gaidar Institute’s surveys, personnel shortage was noted, in Q2 2021, to be a factor that had been holding back their output growth by 26% of enterprises, against 16% in Q1. As a result, according to manufacturers, the lack of qualified personnel topped their list of resource constraints. The shortage of machinery and equipment in Q2 was in second place, being mentioned by 13% of enterprises, while only 16% mentioned it in Q1.
The sentiments across the business community are also very optimistic: the entrepreneurial confidence indices in both the extractive and manufacturing industries have returned to their pre-pandemic levels. If we look at the by-industry components of the industrial production index, significant variances will become obvious. Thus, for example, the industrial production index in the mineral extraction sector lost 0.8% over 2 years.
However, the problems are not limited to those dealing with oil production: the metal smelting sector has also reduced its output compared to 2019. And finally, the production of goods to satisfy investment demand has been growing rather slowly, by only 3.6% over 2 years. Moreover, for 2 months in a row it has been declining at a rather significant rate (-3.5% in April, and -3.1% in May). The ongoing growth in imports of investment goods has been the only result that can be characterized as relatively reassuring.
“The explosive growth in demand for pharmaceuticals and sanitary materials boosted the inputs of intermediate and final medical goods and the products of related industries belonging to the machine-building, chemical and timber processing complexes, as well as the products of the textile and clothing industries. The movement patterns of the production of everyday consumer goods were also shaped by the changes in consumer behavior triggered by the altered rhythm and lifestyle during the lockdown and remote work periods,” Olga Izryadnova explained.
Another risk factor that works against continued industrial growth is the expected increase in wages.
According to the Gaidar Institute’s surveys, personnel shortage was noted, in Q2 2021, to be a factor that had been holding back their output growth by 26% of enterprises, against 16% in Q1. As a result, according to manufacturers, the lack of qualified personnel topped their list of resource constraints. The shortage of machinery and equipment in Q2 was in second place, being mentioned by 13% of enterprises, while only 16% mentioned it in Q1.