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Russian oil bubble finally deflates

The Russian economy of chronic investment hunger, and with certain reservations, now repeats the situation of the 90-ies.

Российский нефтяной пузырь сдулся окончательно    
Kommersant Photo/Maksim Kimerling

2016 – the fourth year of investment decline in Russia, which began even before the sanctions and oil collapse. Economists talk about a second account after 90 years, the investment pause in the country. Investors have lost faith in the Russian oil bubble and no longer expect from our projects super. And the authorities were unable to offer some non-resource – development model that would provide the country the same rapid growth as the oil.


The Russian economy of chronic investment hunger, and with certain reservations, now repeats the situation of the 90-ies. On it at the end of last week drew the attention of economists from the Institute. E. T. Gaidar, the Academy of national economy and public administration, Academy of foreign trade in its operational monitoring of the economic situation in the Russian Federation.

Economists point to an investment pause, which began in the country in 2013 and is still ongoing. “Over the last 17 years of investment pause 2013-2015 is the first long period of no real growth investments in fixed capital”, – they inform. If we take the last 25 years, now we deal with the second investment pause. The first happened in the 90s, and then it lasted for about eight years.

After 2000 investments in Russia almost every year growing up, and, as a rule, faster than GDP and industrial production. This lasted until the crisis of 2009, when investment fell immediately by 15.7%. In 2010 like began post-crisis investment recovery, but it was short-lived.

By the end of 2013, the Rosstat fixed investment decline by 0.2%. Signs of deterioration can be found in statistics for the second quarter – before the deterioration of relations with Ukraine, the conflict around the Crimea, the sanctions and oil collapse. In 2014, investment declined by 2.7%, in 2015 – by 8.4%. And 2016 will be the fourth year of an investment slump – this is evidenced by surveys of managers of industrial enterprises.

“In 2013-2015 a reduction in investment was significantly deeper than the decline in GDP and industrial production output. The investment pause significantly reduces demand in the economy, affecting not only its current dynamics, and prospects,” warn economists.

The authors of the monitoring we hope that last year was passed the bottom of recession. Unless there is a new force majeure, “in 2016 we can see some correction of the trend of investment in fixed capital,” they write. This correction is possible in the case that the most successful businesses will begin to invest more own funds, i.e. will be engaged in financing.

Own financial resources of enterprises is now almost the only source for investments, because Bank loans are issued at high rates, the government, though it is developing anti-crisis measures, not rushing to spend the budget deficit, and external borrowing is hampered by the sanctions.

But “the mere self-financing is insufficient to overcome recession and to enter a new trajectory of growth investments,” the economists explain. This means that even under good circumstances, in 2016 we can expect only a slowing of the decline, but not investment growth.


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