Translated material
GDP from sales
Russia's rapid economic growth in 2006 was driven by investment, trade and construction
The Ministry of Economic Development published yesterday another monitoring of the country's socio-economic development. The research period is determined by the time period January-November: the final results of 2006 will be summed up later, when government economists and statisticians complete the processing of all materials received by them. However, the trends of the last twelve months in the Russian economy are actually reflected in the document.Preliminary annual macroeconomic indicators are already known. Moreover, they were made public before the New Year. In particular, Vladimir Putin spoke about them at a meeting with members of the Cabinet of Ministers at the White House in late December. The President described the socio-economic results as good, “better than last year,” illustrating his point with a number of figures. Thus, according to him, GDP growth amounted to 6.9% (versus 6.4% in 2005).
According to the monitoring of the Ministry of Economic Development and Trade, after a sharp slowdown at the beginning of the year, the dynamics of economic growth accelerated and continue to remain at a high level. Economic growth, while the growth of exports is slowing, is increasingly focused on domestic demand. The growth of investments, the success of the construction sector and trade continue to have a positive impact on the increase in GDP. Thus, in November the growth rate of investments amounted to 15.2% compared to November 2005 (in October and September, 19.1 and 15.0%, respectively). In general, in January-November the increase was 12.9% (in the corresponding period of 2005 - 10.5%). Let us add that, as Mr. Putin said at a meeting with members of the government, foreign direct investment in general increased by 55.5% in 2006. Most of the investments in fixed assets (80.4%) were directed to transport and communications - 26.0%, mining - 19.1%, manufacturing - 17.5%.
The increase in construction in January-November amounted to 14.2% compared to the corresponding period in 2005 (in 2005 - 9.8%). The high growth in retail trade turnover (in January-November by 12.8%) was ensured by the dynamics of real disposable cash income of the population. Over the 11 months of last year, they grew by 10.1% with a faster growth rate of real wages (13.3%). “A further increase in consumer demand and investment remains a determining factor in the growth of the Russian economy in the near future,” states German Gref’s department.
But industrial production in the past year was not encouraging. In January-November its growth was 4.1% compared to 5.6% for the corresponding period last year. At the same time, the share of manufacturing industries in industrial production decreased - from 90.8% over 11 months of 2005 to 73% over the same period last year. The monitoring presents the results of a survey of basic industrial enterprises conducted by the Center for Economic Conjuncture under the Russian government. It turned out that the most important factors limiting the production of manufactured goods were insufficient demand for the company's products in the domestic market (especially for textile and clothing industries), a high percentage of commercial credit and a lack of financial resources (especially for companies producing machinery and equipment). Manufacturers also cited wear and tear and lack of proper equipment, and a high level of taxation (especially for organizations producing leather, leather goods and footwear) as reasons holding back product output. In addition, more and more enterprises are citing growing opposition to competing imports (in January-November the increase in imports was 29.5%).
Increased competition from imports is explained, among other things, by a decrease in their cost in Russia due to the growth of the ruble exchange rate. According to calculations by the Ministry of Economic Development, in January-November the real strengthening of the ruble against the dollar was 14.1%, against the euro - 6.2%. In general, during this period the strengthening of the real effective exchange rate of the ruble is estimated at 7.8%.
Even before the New Year, the approximate annual inflation rate was known - 9% (2005 - 10.7%). A number of experts admit that updated calculations will give 9.1-9.2%, but such a possible adjustment will in no way detract from the fact that 2006 was the first year in Russian history when inflation reached a single digit.
The Ministry of Economic Development and Trade notes that after an increase in inflation rates in July-August, due to the acceleration of the growth of non-interest budget expenditures at the end of the first half of the year (including due to increased wages for public sector employees and pensions), since September the growth of consumer prices has slowed down again. The reasons are also named. Among them are an increase in the supply of goods and competition, primarily from imports (as the ruble exchange rate continues to strengthen), an increase in the demand for money in the real sector (as the economy continues to grow and its de-dollarization), a decrease in inflation expectations, which is reflected in the growth of savings and investments.