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In November the terms of crediting Russian industrial enterprises didnt change. The share of enterprises with normal availability of credits stabilized at the level of 68% with the average minimal interest rate charged by banks remaining the same 11.8%. Banks reduced (although very slightly) only the surplus (above normal) offering of funds. The share of credits being pressed upon enterprises fell from 6% in June to 3% in November. In the IV quarter of 2011 the most convenient credit terms were offered to ferrous metallurgy (82% normal availability of credits, 10% - above normal), chemical industry (68% and 7%, respectively), machine-building (75% and 1%) and construction materials industry (68% and 1%). In food industry 58% of enterprises had normal access to credits and 4% the one above normal.

However, the projections of banks to credit primarily ferrous metallurgy will hardly come true. Most enterprises in the sector do not plan to enlarge the amount of borrowings in the coming months and prospective changes are likely to have the minus sign: in this sector the number of enterprises intending to reduce borrowings prevails over that of enterprises planning to enlarge them. At the beginning of 2012 the most active demand for credits is possible in the consumer goods industry (the balance of credit projections is +29 points), timber processing (+25 points) and construction materials industry (+25 points). In the IV quarter of RUSSIAN ECONOMY IN trends and outlooks in industry at large the ratio of adequate credit supply by banks to credit projections of enterprises fell to 60% down from 69% in the III quarter while the share of unsecured industry projections grew up to 31% after being 22% a quarter before.

The improvement of credit terms for industry can be examined in connection with demand of enterprises for credits. Indeed, if banks offer very good credit terms to a certain group of enterprises but the latter do not need them or do not plan to enlarge borrowings, a greater availability of credits wont do much good. An opposite situation will be observed in the group of enterprises that intend to borrow more but have not deserved the respective loyalty of banks. Certainly, one can suggest that these are unreliable borrowers who want to get larger credits, and bank refusals to them are quite justified. But in any case such analysis involving principally new initial indicators (availability of credits, borrowing projections, ability to pay under credits, estimate of actual financial and economic performance of enterprises) can further the investigation of relationships between banks and industrial enterprises as regards the crediting of the latter.

The monitoring of enterprises ability to service already received credits was launched in 2009 and now allows to estimate this indicator over the 3 recent years, which is certainly good but not comparable to opportunities for analyzing other indicators included in the IEPs business surveys and monitored for 10-15 and even 18 years. The first estimates (to be more precise self-estimates) of the ability to service credits showed that only 61% of enterprises that had borrowed funds considered themselves to be solvable in 2009. For the first entirely crisis year this figure looked quite acceptable. But one should not exclude the possibility that it was overstated since a certain part of enterprises could have overestimated (either intentionally or unintentionally) their ability to pay under credits. 39% of enterprises openly admitted that they had credits but were not quite able to service them. The latter fact evidenced that respondents had enough trust in the surveyor and the data received in the course of surveys was quite reliable. In 2010 the ability of industrial enterprises to service credits grew up to 82%, in 2011 up to 85% (see Fig. 30). So, the principal changes in industrys credit solvency took place in 2010 while 2011 consolidated the earlier made progress.

2009 2010 Fig. 30. Average annual share of enterprises able to service the received credits, % Section The Real Sector of the Economy The results of ranging branches by credit solvency of enterprises in 2011 were quite logical (see Fig. 31) given that not all enterprises in the sector but only the ones having credits were taken as 100%. Metallurgy with its great export potential and high degree of monopolization ranks first. In non-ferrous metallurgy the credit solvency amounts to unprecedented 97%. The third place expectedly belongs to food industry, the financial well-being of which is secured by regular demand of population for food. The fourth and the fifth places are taken by machine-building and construction materials industry, respectively, which can be explained by greater caution of banks when crediting these branches and the selection by them of really reliable borrowers. Chemical industry, timber processing and consumer goods industry round out the rating. While quite low credit solvency of consumer goods industry and timber processing seems quite understandable, the inclusion of chemical industry in this group is explained sooner by insufficient accuracy of banks when crediting enterprises of this branch than by poor financial performance of the latter.

Non-ferrous metallurgy Ferrous metallurgy Food industry Machine-building Construction materials industry Chemical and petrochemical industries Timber processing Consumer goods industry 0 20 40 60 80 100 Fig. 31. Share of enterprises able to service the received credits by branches in 2011, % Since in the regular IEPs questionnaires there are questions about both the availability of credits (i.e. the position of banks towards enterprises) and the ability of enterprises to service received credits (i.e. the self-estimate of credit solvency by enterprises), one can analyze to what extent these positions coincide (i.e. how adequately banks treat borrowers) or diverge (i.e. how mistaken are banks in estimating the credit solvency of enterprises). Two types of bank mistakes can be examined:

a) banks are too stringent in their estimates of credit solvency and do not extend credits to enterprises that could well pay under them;

b) banks inconsiderately credit enterprises unable to service credits.

In 2011 the estimates of credit availability and credit solvency on the average coincided for 75% of enterprises having liabilities to creditors. This is the best result since the start of monitoring in 2009. As compared with 2010 the indicator grew by only 3 p.p. while between and 2010 the increase was as big as 15 points. So, by 2010 industrial enterprises and banks had largely overcome the crisis of confidence between creditors and borrowers and in the situation improved just slightly.

RUSSIAN ECONOMY IN trends and outlooks Within 2011 the best result was registered in the I quarter when the availability of credits and credit solvency coincided for 80% of enterprises. Then this indicator fell down to 75, and 74% in the respective quarters of the year. Unfortunately, this coincidence between estimates of enterprises and banks can be compared only with the figures for early 2009 when the economy had already touched the bottom of the crisis and started a slow recovery from it. In the I quarter of 2009 banks extended credits in accordance with credit solvency of borrowers to only 47% of enterprises. For the remaining 53% the availability of credits did not coincide with their credit solvency. As it was noted, this non-coincidence was of two types. Illconsidered crediting of enterprises that should not be credited amounted then to 10%. But the major mistake of banks was lower availability of credits as compared with credit solvency of borrowers. In the I quarter of 2009 the share of such mistakes was 43% which is the maximum value over the 16 quarters following the onset of the crisis. Then the level of mistakes of this kind started to reduce and by the III quarter of 2010 fell down to 10% - its minimum value. But by the end of 2011 banks were over-cautious in respect to already 19% of industrial enterprises. The level of mistakes of opposite kind (crediting of enterprises that should not be credited) within the 3 years rose up to 14% at the most and only twice surpassed the level of over-caution mistakes.

In 2011 banks most often were over-cautious when crediting timber processing. 39% of enterprises in this branch considered that banks underestimated their ability to pay under credits and limited their access to bank loans. The second place with a big gap belonged to consumer goods industry where the level of over-caution was 27%. Then followed chemical industry with 15% and construction materials industry with 14%. The maximum coincidence between assessments of banks and enterprises was registered in ferrous (with the level of banks over-caution being only 9%) and non-ferrous metallurgy (where the estimates of credit availability fully coincided with the estimates of credit solvency).

The dynamics of unduly limited access to credits relative to credit solvency of enterprises in 2009-2011 shows the development of relationships between banks and enterprises at the stage of recovery from the crisis that started in late 2008. In the I quarter of 2009 banks had the weakest confidence in enterprises of metallurgical sector (see Fig. 32). Then 63% of enterprises in this branch assumed that banks unreasonably constrained their access to credits.

But already in a year the metallurgical sector fully restored the confidence of banks and became the leader by this indicator. And one more year later the estimates of credit availability made by enterprises absolutely coincided with the estimates of their credit solvency made by banks, i.e. not a single enterprise in the sector assumed that banks unreasonably constrained its access to credits relative to its credit solvency, and 4% even found that banks overestimated their solvency when providing access to loans. Other branches started recovery from the crisis in more favourable conditions as regards availability of credits but the restoration of banks confidence in their solvency proceeded at lower rate. However, by the end of 2011 the level of unreasonable limitation of access to credits had almost evened out in most branches.

An exception was consumer goods industry where 31% of enterprises believed that banks tightened credit terms for them relative to their actual credit solvency. Similar estimates were made in timber processing. But since 60% of enterprises in these branches found that banks provide them access to credits in accordance with their credit solvency, one can hardly consider the terms of crediting these sectors to be unreasonably stringent.

Section The Real Sector of the Economy METALLURGY CONSUMER GOODS INDUSTRY CONSTRUCTION MATERIALS INDUSTRY MACHINE20 BUILDING FOOD INDUSTRY I-2009 II-2009 I-2010 II-2010 I-2011 II-Fig. 32. Dynamics of unduly limited access to credits relative to credit solvency of enterprises by branches, average % per 6 months In 2011 significant (although quite explainable) differences in the level of banks overcaution were also registered for enterprises of different sizes. While small enterprises (up to 100 employees) find that banks unduly limit their access to credits in 37% of cases, in the group of medium-sized enterprises (from 101 to 250 employees) this indicator is 29% and loses 10 more percent points for the group of enterprises employing from 250 to 1,000 workers there it totals 19%. And for enterprises with over 5,000 employees the level of unreasonable non-confidence of banks as regards their solvency is as low as 8%. Banks are more aware of the solvency of such enterprises and respectively are more precise in establishing credit terms for them.

According to estimates of enterprises in 2011 the credit terms for industry were the best in the post-crisis period. However, in the second half of the year the positive dynamics of monitored indicators discontinued pointing to the exhaustion of banks capabilities to soften credit terms. Still, in the situation of sluggish recession the industrys demand for credits is almost fully satisfied. Therefore the possible tightening of credit terms in case of preservation of the current macroeconomic trends wont create much problem for the Russian industry.

4.2.6. Response of industrial enterprises to the raising of compulsory insurance contributions (unified social tax UST) In May 2010 we included in the regular business survey the question about how enterprises SUPPOSED to respond to the raising of contributions for compulsory pension, social and medical insurance (UST) from 26% to 34% in 2011. A year later we again posed this question but then industrial enterprises were to describe their ACTUAL response to the tax innovation.

This allowed us to get adjusted and most reliable first-hand information on the response of enterprises to higher tax burden which seemed to be quite timely in the situation of heated dispute about the abolition of this new regulation.

The most commonly projected response of enterprises to the raising of UST (lets use this elder term) in the period of its active discussion in 2010 was the lifting of prices (see Fig. 33).

70% of enterprises planned to resort to it. This share was the highest for small enterprises (less than 100 employees) 82% of them made such projections. The analysis by branches RUSSIAN ECONOMY IN trends and outlooks showed that the raising of prices was most likely in consumer goods industry, machinebuilding, chemical and petrochemical industries. 80% of state enterprises, 68% of open jointstock companies, 73% of closed joint-stock companies and 80% of limited liability companies reported their intention to lift prices.

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