Section 3 The Real Sector 3.3. Real Sector Investments 3.3.1. Domestic Fixed Investments Fixed Investments Movement: General Trend Slowdown in the economic activity has resulted in a new situation in the investment sector.
Through 2008 a gradual downward trend in the investment growth was observed which coupled with the global financial crisis and from November 2008 was followed by a drastic turning point in behavior: for the first time since 2000 the investment upturn trend got to the negative territory. In the 4Q 2008 fixed investments constituted 97.7% of the same period of the preceding year. In 2009 downward trend in fixed investments took a more acute form: fixed investments shrank by 17.0%, where GDP contraction stood at 7.9%. The fall in the fixed investment volume in the small business sector over the year exceeded 25%. Downward trend in the investment sector predetermined the features of technological and reprocessing activity in the economy as a whole and across the types of economic activity, as well as the process of financing investment expenditures.
30 25 20 15 10 5 0 1999 2001 2003 2005 2007 2009 I II III IV I II III IV 2000 2002 2004 2006 2008 -5 2008 2009 -10 -15 -20 Fixed investments Commissioning of residential houses Construction volumes GDP Source: Federal service of state statistics Fig. 1. Rates of Growth of GDP, Fixed Investments, Construction Volumes and Commissioning of New Residential Houses in 2000–2009, and quarter-on-quarter 2008–2009, in % to corresponding period of the preceding year 257 RUSSIAN ECONOMY IN 2009 trends and outlooks Positive trend in construction of industrial and infrastructure facilities coupled with the downward trend in commissioning of residential housing was characteristic of 2009. In 2009 commissioning of agricultural facilities went up by 46.8%, in the industrial sector – 11.8% in comparison with a year ago. It is worth noting that in spite of rather rigid financial constraints, commissioning of industrial facilities in public health sector went up by about 1.7fold (Table 1).
Table Commissioning of Buildings across Types in 2007– Total floor space, mln square m In % to a year ago 2007 2008 2009 2008 Buildings commissioned 91.0 93.8 89.8 103.1 95.Of which:
Industrial 2.2 2.2 2.5 100.0 111.Agricultural 1.5 2.0 2.9 133.3 146.Commercial 7.9 6.3 6.2 79.7 97.Educational 1.9 1.8 1.0 94.7 56.Public health 1.1 0.9 1.5 81.8 169.Other 3.0 3.5 0.9 116.7 27.Source: Federal service of state statistics Downward trend in commissioning of residential housing was observed from the 2Q and by the end of 2009 constituted 6.7%. Attention should be paid, first, to the reduction in net investment volumes in residential housing construction in comparison with JanuarySeptember 2008 by 74.8 bn Rb and, second, to the decline of the investment in residential housing construction in fixed investments structure in January-September to 6.7% against 7.6% for the same period a year ago.
One more peculiarity of the investments structure was increased share of expenditures on construction of buildings and facilities in fixed investments structure in 2009 to 55.8% (by 4.percentage points more that for the same period of the preceding year) under the reduction in the share of expenditure on machines and equipment to 31.2% against 33.4% in 2008. Let us point out that against the background of sharp downturn in domestic production of capital goods, investments in imports and in purchasing of machines, equipment and means of transport (without small business and informal economy) in 2009 came to 371.8 bn Rb or 20.7% of the overall volume of investments in machines, equipment and means of transport against 20.0% in previous year. In other words, in the first half we observed positive trend in purchases of imported equipment and machinery coupled with sharp scaling back of their domestic production. In the 3Q production curtailment of production of domestic capital goods was accompanied by a downturn in the investments in imported equipment and machinery, and in the 4Q against the background of change in the ration of domestic and import prices and slowdown of the recession, an increase in the share of domestic machinery and equipment in the types structure of fixed investments was observed.
Section The Real Sector Table Structure of Fixed Investment across Types of Major Assets in 2008–(without small business and informal economy), in % to total Of which Of which I half January- I half January I quarter I quarter year September year September Fixed investments – total 100 100 100 100 100 100 100 Of which across types of major asserts:
Residential housing 7.5 8.1 7.8 7.6 6.0 6.0 6.0 6.Buildings and facilities 52.4 48.5 49.9 51.3 55.8 51.6 54.4 54.Machines, equipment, means of transport 33.0 34.5 34.1 33.6 31.2 32.2 30.7 31.Other 7.1 8.9 8.2 7.5 7.0 10.2 8.9 8.Source: Federal service of state statistics.
Changes in the Investment Structure across Sources of Funding Investment structure against sources of financing was also subjected to notable changes.
Rather sharply contracted the share of proprietary funds of organizations in the investments’ volume (by 2.8 percentage points in 2009 against a year ago). Correspondingly the share of raised funds in the investment structure went up. The share of investments from revenues shrank most dramatically (from 18.5% in 2008 to 14.8% in 2009). In its turn, the role of budget funds is growing in the structure of borrowed funds directed to fixed investments: in 2009 1240.8 bn Rb of fixed investments were funded from the budget (21.5% of the overall volume of investments in the economy), of which the federal budget funded 622.9 bn Rb (10.8%) and budgets of the subjects of federation – 546.6 bn Rb (9.5%). The federal budget funding directed at investments increased by 1121.1 bn Rb. This fact has to a certain extent offset contraction of the investment from the budgets of the constituent entities of the Russian Federation by 166.6bn Rb and budgets of other levels of government authority – by 14.4 bn Rb (Table 3).
Table Structure of Fixed Investments across the Sources of Financing, in % to total (without small business and informal economy) 2008 Fixed investment – total Of which across sources of financing:
Net worth 39.5 36.Of which:
Income 18.5 14.Borrowed funds 60.5 63.Of which:
Bank loans 11.8 9.Including foreign banks 3.0 2.Borrowed funds of other organizations 6.2 10. Budgetary funds: 20.9 21. Federal budget 8.0 10. Budgets of the subjects of the Russian Federation and local budgets 11.3 9.Other 21.2 21.Including funds obtained for share participation in construction 3.5 2.Including funds of the population 1.9 1.Foreign investment in the overall volume of fixed investment 4.3 4.Source: Federal service of state statistics.
State demand for domestically produced goods and services was maintained by means of the implementation of planned investment projects in the field of transport, telecommunica RUSSIAN ECONOMY IN trends and outlooks tions, etc. realized within Federal Targeted Program (FTP) and Federal Targeted Investment Program (FTIP), as well as by way of large infrastructure projects of the Investment Fund. In the wake of the crisis the government stimulated investments in the economy by means of the implementation of technological federal targeted programs whose investments were either maintained at the planned level or reduced insignificantly.
In compliance with the List of construction sites and projects for the federal government needs approved by the RF Government edict of 31 December 2008 № 2058-р and included in the federal targeted investment program for 2009, the state envisaged allocation of public funds for 2444 construction sites, construction projects and various events with planned commissioning of 1186 projects.
In October 2009 the List of construction sites and projects of the federal targeted investment program was amended in accordance with applications submitted by principal administrators of the federal budget funds and caused by revisions in the budget allocations, as well as bringing names of government customers, developers, construction sites and projects and other parameters of construction sites and projects in line with registration documentation.
According to data as of 1October 2009 in compliance with the amended List government investments were envisaged for 2666 construction sites, projects and events and commissioning of 1412 projects.
In 2009 projects construction and realization of events included in the federal targeted investment program (FTIP) with account of optimization of the volume and structure of expenditure of the federal budget were to receive 708.0 bn Rb from the federal budget, of which for financing the projects included in the state defense order – 158.4 bn Rb. For financing the projects included in the federal targeted programs the government planned to allocate 503.bn Rb, of which 99.9 bn Rb were planned to direct to the state defense order.
With account of introduced amendments, in 2009 the total volume of budget allocations on construction projects and implementation of measures included in the federal targeted investment program (FTIP) amounted to 601.2 bn Rb, of which directed to financing projects in the federal targeted program – 298.9 bn Rb, on construction projects and implementation of measures outside of the FTIP in 2009 – 197.8 bn Rb. The volume of funds directed to the financing of special assignments included in the state defense order constituted 104.5 bn Rb or 17.4% of the overall volume of the FTIP (of which within the planned part of the FTIP – 62.bn Rb, outside the planned part – 41.8 bn Rb.
According to the preliminary data of the Federal service of state statistics, construction sites and projects of the FTIP (excluding special assignments included in the state defense order) which are being monitored by the Federal service of state statistics the level of budget allocations in January-December 2009 constituted 317.1 bn Rb or 63.2% of the annual limit.
In 2009 construction sites and projects of FTIP which were monitored by the Federal service of state statistics received budget allocations in the amount of 317.1 bn Rb. As of 1 January 2010 1715 projects were financed in full, and 597 projects were in the state of technical readiness in the range between 51.0% and 99.9%.
Considerably higher than on the whole across construction sites and projects reserved for the state needs the annual limit of state capital investments was financed in agro industrial complex (80.3%) and transport complex (79.4%). In case of the special complex budget allocations were financed up to 62.3% and in case of the social complex to the extent of 51.6%.
On average across Russia for January-December 2009 nearly 90.2% of the overall volume of funds was allocated using all sources of funding. Special complex was financed in full Section The Real Sector (100%) and the social complex was financed at the level of 87.0%, and the industrial production complex – at the level of 91.7%.
Table Projects Envisaged by the Targeted Investment Program and the Volume of State Capital Investments in 2009 г. (exclusive of construction sites and projects included in the state defense order) Commissioned Limit of state capiNumber of projects in January- tal investments for in October 2009 2009 Financed from Total investments the federal out of all sources In- Of which budget in 2009 of funding Full service In from the Total capac- Total dated in part federal ity 2009 budget Units Bn Rb Total 2643 1413 212 67 527.1 501.7 317.1 303. Of which: 289 127 13 7 203.1 197.2 156.6 148.Transport complex Agricultural complex 425 261 50 22 12.2 11.7 9.4 9.Special complex 351 189 32 6 19.9 19.1 11.9 12.Social complex 1427 730 102 32 265.7 249.7 128.8 123.Other projects 151 106 15 – 26.2 24.0 10.4 9.Source: Federal service of state statistics North-Western, Urals, Siberian and Privolzhsky Federal Okrugs have received more than average amount of funds allocated for construction sites and projects of the FTIP. In the Central, Sothern, and Far-Eastern Federal Okrugs disbursement of budget capital investments has been significantly lower than the average mark (Table 5).
Table Disbursement of Funds on Construction Sites and Projects for the Federal Needs Actually disbursed from all sources Limit of appro- Limit of state inof funding priations from all vestments per year, bn in % to limit per sources, bn Rb Rb Bn Rb year Russian Federation 527.1 501.7 303.9 57.Central Federal Okrug (FO) 218.3 217.7 90.8 41.North-Western FO 90.6 76.6 67.6 74.Sothern FO 69.8 69.0 45.3 64.Privolzhsky FO 22.8 21.7 16.0 70.Urals FO 6.6 5.9 6.5 98.Siberian FO 31.6 30.3 24.4 77.Far-Eastern FO 87.4 80.5 53.3 61.Source: Federal service of state statistics.
Contraction of domestic market and downturn in the revenues of the economy predetermined, as was mentioned earlier, drastic reduction in the volumes and share of the proprietary funds of enterprises and organizations in the structure of the sources of financing fixed investments. In 2009 net worth of large and medium-size enterprises directed to the investments amounted to 2092.0 bn Rb against 2506.6 bn Rb a year before. Acute shortage of net worth was offset by the bank loans and borrowed funds. In 2009 out of 3765.5 bn Rb of borrowed funds 694.1 bn Rb or 18.4% were bank loans (Fig. 2).
RUSSIAN ECONOMY IN trends and outlooks Source: Federal service of state statistics.
Fig. 2. The Structure of Borrowed Funds directed to Financing Fixed Investments in 2008 and 2009, in bn Rb The structure of bank loans in the sources of financing fixed investments were subject to significant changes. If in 2008 the share of foreign banks loans amounted to 22.0% of the overall amount of bank loans, then in 2009 this mark went up to 29.3%. Foreign banks loans in 2009 in comparison with a year ago went up by 4.3% at net fall of domestic banks loans directed to fixed investments by 156.5 bn Rb (decrease by 29.3% against the level a year before). As a result, the share of foreign investments in the overall volume of fixed investments increased to 4.6% and constituted 263.8 bn Rb.
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