The Building and Investment Complex: General and Regional Trends in H1 2017

In H1 2017, the macroeconomic situation was determined by a change in the trend of the past four years: investments in capital assets grew at a higher rate than the dynamics of the GDP and households’ ultimate consumption.  With a 1.5% GDP growth in January-June 2017, investments in capital assets increased by 4.8% as compared to H1 2016.

Changes in the extent of capital investments did not make up for structural imbalances in renewal of capital assets. In H1 2017, the share of the aggregate volume of investments in mining, manufacturing and transportation in the total volume of capital investments rose to 27.7% and exceeded by 1.0 p.p. the level of the corresponding period of the previous year on the back of faster growth in capital investments in development of pipeline transport.

The pattern of capital investments in industry was determined by the prevailing trend of reduction of the extent of investments in manufacturing due to a drop in investments in the iron and steel industry and engineering. With all other factors being equal, the existing trend of reduction of investments in production of capital goods and engineering structural materials poses higher risks to building and investment activities.

With high interest rates, investment funding and focus on optimization of costs were determined by the dominating share of enterprises’ and entities’ own funds (56.0% of the total volume of investments in capital assets). With financial results getting worse and profitability falling in H2 2017, the processes of formation of investment resources should be closely followed.

In H1 2017, at the regional level capital investments kept falling in the Siberian Federal District (94.0%) and the Privolzhsky Federal District (92.5%) where the share of manufacturing industries, including engineering was rather high in the economy. Strong growth in capital investments is related to implementation of large infrastructure projects (the Southern Federal District) and utilization of new instruments stimulating investment activities (the Far Eastern Federal District).

A priority line of regional development is development of mechanisms and instruments that stimulate mobilization of domestic resources consolidate regions’ own economic potential and promote trans-regional networking.

With high sensitivity to the dynamics of financial results, the rates of investments and volumes of construction and building work may differentiate further at the regional level. According to the forecast of the social and economic development of the Russian Federation, in 2017 the expected rates of capital investments and GDP are estimated at 104.1% and 102.1%, respectively.

Olga Izryadnova, Head of the Structural Policy Department