Sergey Tsukhlo, Head of Business Surveys Department of the Gaidar Institute, told ”Nezavisimaya Gazeta”about factors restricting the industrial investment optimism in early 2022.

The survey of industrial enterprises conducted by the Gaidar Institute employees, revealed the following hierarchy of barriers to the investment: lack of own funds, high prices for machinery and equipment, expensive loans and low return on investment.

The monitoring of investment activity allows to build a hierarchy of factors that limit the industrial investment optimism in early 2022.

"First of all, this is the shortage of enterprises' own financial resources, secondly, it is the high prices for machinery and equipment followed by high cost of loans and difficulties in obtaining loans for long-term purposes, as well as the low profitability of investments," says Sergey Tsukhlo.

Surprisingly, the shortage of own funds is evidenced by the enterprises that made a record profit last year. Thus, the profits increased 2.4 times in the manufacturing industry compared to the previous year according to Rosstat. The growth of profits in the economy was 2.5 times on average.

Sergei Tsukhlo cites the "uncertainty in the rapid recovery of the Russian economy” among the factors that prevent investment. However, the significance of this factor showed a marked decline over the past 12 months, i.e. from 31 to 12%. Hence, the industry is now confident enough in the domestic economic growth as a favorable factor for investment, the expert believes.

The investment optimism demonstrated by the Russian industry for 11 months now, although stable, turns out to be insufficient. The "shortage of own financial resources" in 2022 was cited by 54% of enterprises. Compared to 2021, the shortage of own financial resources was cited more frequently, while a year ago it was cited by 45% of enterprises. The absolute minimum of references (43%) was registered in 2020, and the maximum (91%) in 1998, according to employees of the Gaidar Institute.

The growing restraining effect of the shortage of own funds against the growth of the balanced financial result is explained by the increase in prices for Russian machinery and equipment, which the companies are planning to buy, as well as the rising cost of construction and installation works, believes Sergey Tsukhlo. The weakening of the ruble also presents challenges for investments.

The importance of high interest rates on loans rose from 12 to 30% according to frequency of references. Difficulties in obtaining a long-term loan have also demonstrated significant growth as a barrier to the growth of investments. Whereas a year ago this factor was mentioned only by 6% of enterprises (absolute minimum), in the beginning of 2022 it was already cited by 17% of enterprises.

Participating in the Gaidar Institute's survey, industrial enterprises did not highlight the negative effects of the geopolitical sanctions tension. However, the analysts assume that the growing tension between Russia and the U.S. will somehow affect the investment plans of enterprises.