Sergey Drobyshevsky, Principal Researcher at the Gaidar Institute, spoke to Izvestia on the reasons for decline of investment activity in Russia. Thus, the expert commented on the results of the latest monthly analysis of macroeconomic trends published by the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF).
According to the study, investment activity in Russia is stagnating showing signs of a growing decline. Consumer demand and budget expenditures remain the main drivers of the economy, while investment remains somewhat of a weak link, constrained by expensive loans, low profitability, and structural problems.
According to Sergey Drobyshevsky, the CMASF data indicate, first and foremost, the end of the phase of rapid investment growth observed in H2 2022–2024, rather than any crisis in this area.
"From mid-2022 to 2024, the entire Russian economy (reflected by GDP growth rates, the output gap, fixed capital investment dynamics, real wage growth, and unemployment) was in a state of 'overheating' (above long-term sustainable growth rates). Since the end of 2024, these indicators have returned to their long-term averages, suggesting a significant slowdown in growth dynamics," the expert noted.
He believes that this fully applies to fixed capital investment. Specifically, considering the investment activity index chart, it is obvious that current figure is approaching the investment activity level of 2019, a relatively prosperous year before the pandemic.
"Accordingly, by the end of 2025, the growth rate of fixed capital investment can be expected to be close to zero. However, in the following year, 2026, the decline in investment activity will be stopped, and certain growth can be expected, although, of course, not at the same rate as in 2023-2024," predicts Sergey Drobyshevsky.
Sergey Drobyshevsky also noted that both the decline and recovery in investment activity are primarily frontal, affecting not only industries tied to final consumption but also those oriented to varying degrees toward ensuring national defense and addressing the SMO issues.
In turn, the expert believes that the Central Bank of the Russian Federation's high key rate serves as a signal under these conditions, triggering the process of completing the growth cycle.
"This happens because inflation is also largely linked to economic overheating. As the economy enters a long-term growth trajectory, inflation followed by the key rate, will decline. This will also create more favorable conditions for investments. However, the primary factor will not be the cost of borrowing, but rather the growing need for companies in new investments for further development, once the investments made during the boom are fully utilized in the current production process," concluded Sergey Drobyshevsky.