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Underlying the price fall for copper in September in particular was the rise of its stock at London Metal Exchange up to the peak level over the past half-year. By contrast, nickel prices slid particularly because of information of the renewal of its production at a mine in Montana, which had been put on hold because of fire.

During the first 9 months of 2006 Russia exported goods worth a total of USD 223.9 bn., or at 28.2% over the respective period of the prior year.

According to the |Federal Customs Service, between January and September 2006 the specific weight of fuel and energy goods accounted for 70.3% of the commodity structure of export to FarAbroad countries (vs. 66.7% reported over the period between January and September 2006). The value volumes of oil supplies over the first 9 months of 2006 grew by 30.6% against an insignificant (at 1.1%) drop in their physical volume. The average contractual prices for oil soared up to USD 485.5/t. (66.7/barrel) and consequently began declining in September down to the average 2006 level of USD 446.9/t (61.2/barrel).

Between January and September 2006 vis--vis the respective period of 2005 the proportion of export of metals and metal goods sank by 1.7 percentage point and accounted for 13.5%. The physical volume of export of the noted goods was down because of contracting volumes of supplies of iron and alloyed steel flat rolling (at 16.5% down), ferrous metals scrap (23.7%), ferroalloys (19.8%), copper (11.7%). Meanwhile, the period between January and September 2006 saw the rise of the physical and value volume of export supplies of raw aluminum at 17.4% and 34.9%, respectively, physical volumes of cast iron (at 17.2%), iron intermediates at 4.3%.

Table Average World Prices in September of the Respective Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Oil (Brent), USD/barrel 22.9 18.12 13.1 22.6 32.15 26.18 28.26 27.1 42.68 61.7 62.Natural gas, USD/1 mn 2.743 2.251 1.858 2.62 5.118 2.204 3.625 4.678 5.483 12.745 10.Gasoline, USD/gallon 0.648 0.579 0.421 0.683 0.941 0.757 0.797 0.832 1.26 1.958 1.Copper, USD/t 1932.6 2032.7 1676.4 1876.8 2037.5 1452.9 1498.3 1816.4 2892.6 3858.0 Aluminum, USD/t 1428.3 1544.6 1391.3 1493.6 1600.2 1342.6 1294.7 1415.0 1726.0 1840.0 Nickel, USD/ 7426.4 6523.6 4229.8 6932 8654.3 5040.9 6592.5 9996.1 13298 14228 Source: computed basing on the data of the London Metal Exchange, International Oil Exchange (London) In the period in question, the proportion of machinery and equipment accounted for 3.1% (vs. 3.2% reported a year before). The government initiatives on financial and guarantee back-up to the industrial export resulted in a series of huge export contracts. More specifically, export supplies of engines and power-plants grew at 94.5% in value equivalent and at 12.0% in physical equivalent, electric equipment at 21.% and 13.7%, respectively.

The value volume of import supplies over the first 9 months accounted for USD 112.4 bn., thus exceeding at 28.4% the respective index of 2005. Great growth rates of import are driven by rising incomes in the economy and appreciation of Rb. According to the Bank of Russia, Rb. appreciated against USD at 9.0%, at 12.9% - against Euro and at 9.9% against the basket of currencies of trade partners. In the first 9 months of 2006 the populations real disposable incomes rose at 12.3%.

The goods structure of the Russian import experienced some changes associated with the ongoing accelerated growth in the group of machinery and equipment. The specific weight of this particular group grew from 46.9% in January and September 2005 up to 50.5% in January-to September 2006.

The declining competitiveness of the national machine building and the price rise for its output has had a stimulating effect on the rise in import supplies. Between January and September 2006 the importation of machinery and equipment (in value equivalent) rose by 52.4% vis--vis the respective period of the prior year.

The specific weight of foodstuffs and raw materials for their production in the total volume of the nations import slid to 15.7% vs. 17.4% reported over the respective period of 2005.

The trade balance over the first 9 months 2006 accounted for USD 111.5 bn., or at 28% up vs. the respective 2005 index.

The IET forecasts a 20% rise in export in 2006, with a 18% rise in export to the non-CIS countries.

The pace of increment in Russian import is forecasted at the level of 22%, while that from the non-CIS countries may post a 26% growth.

On November 19, 2006, Russia and the US signed a protocol on Russias accession to WTO. Like other similar agreements Russia had already signed with other nations, it determines conditions of granting access to the national market for goods and services.

Russia has succeeded in maintaining its stance, according to which no duty should be subject to reduction as of the date of Russias actual accession to WTO. Tariffs on particular items should be liberalized within certain transitional periods (between 1 and 7 years), with the account of the extent to which a given item is critical for the domestic industries.

The average weighted rate on agricultural and industrial goods will be lowered at 3 percentage points, but some rates on a number of items should undergo a far greater reduction. More specifically, Russia has agreed to partly open the market for chemicals (with the respective duty rates being subject to a 5-6% reduction over the period of 3-4 years), passenger cars (from 25 to 15%) and civil aircraft (from 20 to 7.5- 12%).

Tariff quotas on imported beef, pork and poultry shall continue to exist within the frame of the current parameters until 2009, with a possibility of extension of their effect upon completion of negotiations with suppliers concerned.

The blocking duty on ethyl alcohol will remain unchanged, while those on imported wine, cognacs and whiskey should be lowered from the current 20 to 12%.

It was the financial services sector that posed a major challenge during the negotiations. Russia has not assumed obligations with regard to granting access to the national market to direct branches of foreign banks. Furthermore, Russia keeps the possibility to apply 50% quotas of foreign participation in the banking and insurance sectors. Meanwhile, Russia has agreed to grant access to direct branches of overseas insurance companies in 9 years upon its joining WTO.

In November 2006, Russia also completed negotiations with Sri-Lanka. The stumbling block was access to Russia tea market. The parties have compromised on lowering import duties on packed tea from 20% to 12.5%, depending on a certain sort of tea, within the period of 3-4 years upon Russias joining WTO, while unpacked tea will be subject to the rates reduction from 5%b to 0% in a year upon Russias joining the Organization.

There still exist disputable and unresolved matters in negotiations with Georgia and Moldova, but hopefully Russia would be able to reach an agreement with these countries.

Once the bilateral negotiations with the WTO members are complete, Russia will have to pass through the stage of multilateral negotiations on its accession to WTO, which should take another halfyear.

N. Volovik Factors of Economic Growth in 1996-Grouping of economic growth factors in extensive and intensive indicators allows to estimate the quality of growth and forecast further tendencies of economic development. Here the most important component is the Cumulative Factor Productivity (FP), which reflects intensive growth components.

As was shown in previous IET studies, the CFP was decreasing at the beginning of the period of transition in the economy. However, the turnover from decline to growth happened in 1995-1996, i.e.

somewhat earlier than the total production output started to rise11.

According to the forecast of Ministry of Economic Development and Trade, in 2005 the volume of gross value added (GVA) of industries in real terms will make 6.7 per cent versus the preceding year level. Production growth is accompanied with the upgrading of extensive factors. Positive trends of the labor market, namely higher demand for labor, have resulted in the increased average annual employment level in 2005 by 0.8 per cent (the surplus of this indicator in comparative terms made 0.05 p.p.).

Regardless of the growth of investments in the fixed assets by 10.7 per cent, in the background of intensive depreciation of production facilities, the growth of the volume of the fixed assets in made 1.33 per cent12. According to the forecasts, the growth of average annual employment in will make 0.54 per cent, which is lower than the relevant indicators of the year of 2005 and the period of 1999 through 2004. According to the estimates made on the basis of the Ministry of Economic Development and Trade data on the growth of investments by 12.5 per cent, in 2006 the growth of fixed assets volume will make 1.57 per cent. As per decomposition algorithm (See Table 1, Fig. 1), the growth rates of GVA of economic sectors in 2005 are explained by the changes in labor input (1.per cent) and by the change in the volume of the involved capital generation (by 33.9 per cent). The basic incentive of production growth in 2005, as well as within preceding periods, stays CFP, the growth of which is based on the increase of production output rate by 64.40 per cent. On average, within 1999-2005 the growth is explained by GVA growth (by 67.60 per cent). The estimates of relevant factors in 2006 are as follows: 2. 93 per cent for labor input, 14.82 per cent for capital input and 82.25 per cent for CFP. However, as far as the forecasts for the major indicators for 2006 are made The methodology is presented in detail in the IET study Factors of Economic Growth, Research series, 70, IET, . 2003, 390., www.iet.ru.

The estimates of fixed assets growth are based on the assumption of permanent index of fixed assets depreciation and sustainable investment level for their upgrading.

only in terms of resources (employment level and fixed assets volume), the forecast on CFP share might be overestimated.

Table 1.

Structure of GDP Growth Rates per Annum 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005 1997 1998 1999 2000 2001 2002 2003 2004 2005 GDP 1,40 -5,10 5,80 9,40 5,00 4,70 7,30 7,20 6,40 6, I. Input by Factors -1,46 -1,11 2,70 3,21 1,52 0,96 2,34 2,99 2,28 1, I.1 Labor -0,34 -0,49 0,71 0,40 0,25 0,32 0,26 1,02 0,11 0, Employment -0,84 -0,57 0,08 0,19 0,21 0,38 0,21 0,43 0,30 0, Working hours 0,50 0,07 0,63 0,21 0,04 -0,07 0,05 0,60 -0,20 - I.2 Capital -1,13 -0,61 1,98 2,82 1,28 0,65 2,09 1,97 2,17 0, Fixed Assets -0,22 -0,23 0,07 0,27 0,39 0,43 0,42 0,54 0,83 0, Production capacities utilization rate -0,90 -0,38 1,92 2,55 0,89 0,21 1,67 1,43 1,3417 - II. CFP 2,86 -3,99 3,10 6,19 3,48 3,74 4,96 4,21 4,12 5,% versus GVA growth rate in economic sectors GDP 100 100 100 100 100 100 100 100 100 I. Input by Factors -104,58 21,69 46,49 34,20 30,48 20,46 32,08 41,56 35,60 17, I.1 Labor -24,08 9,68 12,27 4,22 4,92 6,73 3,51 14,22 1,69 2, Employment -59,69 11,13 1,33 1,99 4,12 8,13 2,88 5,95 4,74 2, Working hours 35,61 -1,45 10,94 2,23 0,80 -1,40 0,63 8,27 -3,05 - I.2 Capital -80,50 12,02 34,22 29,98 25,56 13,73 28,57 27,34 33,91 14, Fixed Assets -16,05 4,58 1,16 2,86 7,84 9,22 5,73 7,52 12,96 14, Production capacities utilization rate -64,46 7,44 33,06 27,12 17,71 4,51 22,84 19,81 20,95 - II. CFP 204,58 78,31 53,51 65,80 69,52 79,54 67,92 58,44 64,40 82,The impact of GVA of industries over the growth rate, which depends on developments in labor input level, to a great extent is related to the changes in employment level, whereas the growth of the latter is, in its turn, highly dependant on the growth of share of employable population in the total number of population (this share in 2000 made 57.9 per cent, in 2005 62.9 per cent). However, as opposed to that, the share of economically efficient population in the total number of employable population was reduced from 84.2 per cent in 2000 to 81.8 per cent in 2005, what in the background of insignificant growth of employment level has led to the reduction of the growth of the number of working people indicator. Although the working time volume of each employee per year has grown as compared with the level of 1999, this growth is explained by an upswing in 2004, and in other postcrisis years that indicator did not exceed 2.5 per cent. As a result, labor input is a less significant indicator in the growth decomposition, and its impact in the recent years has a trend to reduction. Moreover, with regard to the existing demographic problems, one can foresee in the nearest future a high probability of a slow-down of production output growth rates, which is determined by that indicator.

Insufficient investments, the major share of which is spent for upgrading of old production facilities due to depreciation thereof, and as a result, insignificant developments in the volume of fixed assets, Tentative estimates Forecast of Ministry of Economy and Trade Assessment of an average yearly employment is made with the help of an autoregressive model, based on monthly statistical data For the year of 2006 the volume of investments was estimated on the basis of the forecast made by the Ministry of Economy and Trade Evaluation of changes of production capacities utilization rate is based on the assumption that the share of power consumed for production in the final product is stable.

determine the character of capital input structure, where the changes depend on fluctuations of its utilization rate.

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