A factor behind the insufficient competitiveness of domestic products is that economic growth was mainly oriented towards more intensive utilization of production capacities. The lack of substantial shifts related to the introduction of new production capacities in fact prevented the consistent implementation of the policy aimed at import substitution and diversification of export flows. The increasing influence of competing imports has significantly affected the dynamics of development of internally oriented industries. While industrial output increased by 3.7 % in comparison with the figures registered in 2001, imports grew by 12.5 %. An increase in the share of imports is the pronounced trend in the structure of resources of the consumer market and the market of material and technical products. Besides, the real Ruble appreciation was a factor behind the growth in imports.
In 2002, the revenue structure of GDP was formed under the influence of outpacing rates of growth in wages and salaries in comparison with productivity of labor, changes of price proportions among industries, growth in tariffs on services and products of natural monopolies, and dynamics of international prices of Russia’s staple exports. In 2002, the share of wages and salaries in GDP increased by almost 2.2 p.p. in comparison with the figures registered in 2001. While the general trend towards declining rates of profit in the economy prevailed, the profitability of trade, communications, and transport somewhat increased. In spite of the gradual deceleration of rates of decline in profits in the second half of 2002, indicators of profitability remain considerably below the levels observed in 2001. In industry, in January through November of 2002, the balanced financial results made 70.5 % of the level registered in the respective period of the preceding year. The decline in profitability of production in fuel, raw materials, and final industries has determined the deceleration of investment demand. The share of profits in the structure of sources of financing of investment activities at the expense of own funds decreased almost by 10 p.p. in comparison with the figures observed in 2001.
In 2002, there was registered a clear asymmetry of growth in production, household incomes, and final demand, what does not permit to unambiguously evaluate the economic situation. While in through 2000 the expansion of household demand was constrained by the low level of effective household demand, in 2001 through 2002 the situation changed. The active social policy aimed at the restoration of living standards resulted in an increase in the share of expenditures for final demand in GDP by almost 2.2. p.p. in comparison with the figures registered in 2001. It shall be mentioned that in contradistinction to the period of 1999 to 2001 this increase was related both to a growth in household consumption, and an increase in expenditures for final consumption of state agencies. In 2002, real household incomes increased by 8.8 %, real wages and salaries – by 16.6 %, real gross pensions – by 16.9 % in comparison with the levels registered in 2001. The major changes in the structure of GDP utilization occurred at the background of outpacing growth in final consumption in comparison with gross accumulation and investment in the real sector of the economy.
In the course of the analysis of the state of the Russia’s economy, it shall be stressed that in the share of gross savings in GDP made 32.8 % as compared with 32.8 % registered in 2001 and 23.% in 1998. The present profitability of production and export operations guaranteed the fulfillment of obligations related to timely financing of budget expenditures and servicing of the public debt without urgent borrowings on the internal and external financial markets. At the same time, the share of investment in fixed assets in GDP declined by almost 2.5 p.p. The sharp reaction of investment in fixed assets to the dynamics and the nature of formation of gross savings in the economy reflects the fact that mechanisms of transformation of savings in investment are underdeveloped.
O. Izryadnova IET Business Survey: Industry The seasonal decline in sales and non-cash transactions forced enterprises to sharply decrease their output. However, a growth in finished stocks could not be avoided, what made the finished stocks excessive. Assessments “above norm” prevail across all industries. A traditional increase in costs made enterprises to rise prices, what resulted in accelerating rates of decline in profits at the background of falling demand.
The dynamics of cash sales in January confirmed the pessimistic December forecasts. Effective demand continued to decline. As a result, in the four last months the rates of changes in sales decreased from + 15 % to –22 % (in terms of balance). At the same time, the former value is the best for the period of 2001 to 2002, while the latter is the worst over the whole post-default period.
Therefore, the downfall in sales observed in January of 2003 has exceeded the respective indicator of 2002. An increase in cash sales persisted only in power engineering (+ 45 %). Across other industries the balances of responses were negative.
Non-cash types of demand also continue to decline. The balance of changes in barter dropped down to –15 %, promissory notes and offsets – to –14 %. The rates of decline in effective demand (-22 %) again proved to be higher in comparison with other types of demand. Reports on a decline in barter prevailed across industries and were most frequent in construction industry, chemistry, petrochemistry, and mechanical engineering. An absolute growth in amounts of promissory notes and offset transactions (i.e. positive balance) was registered only in power engineering (+ 9 %). These operations continued to decline across all other industries.
Accelerating rates of decrease in effective demand did not change evaluations of its amounts.
Slightly over 30 % of enterprises still assess the existing amounts of cash sales as “normal.” In August through September of 2002, the number of such reports was at about 40 %. On the whole, surveys register a high and stable dissatisfaction (the balance of evaluations is always negative) of Russia’s enterprises with effective demand for industrial products.
The situation relating to evaluation of barter, promissory note, and offset demand is different. Since the beginning of 2002, dissatisfaction with these types of demand started to prevail across industries.
Enterprises lacked non-cash transactions to realize all their output. In the beginning of 2003, this lack was reported at record highs. The balance of evaluation of barter (above – below norm) decreased to – 8 %, while promissory notes and offsets declined to –10 %. In other words, across Russia’s industries there was registered the maximal prevalence of enterprises, which evaluated amounts of non-cash transactions as insufficient. The greatest lack of non-cash demand was observed in construction industry, metallurgy, chemistry, and petro-chemistry.
The decline in all types of demand transactions forced enterprises to decrease the volumes of their output. The January decline in production made –17 % (in terms of balance) and was not so pronounced as a year ago (-21 %). However, this decline was registered across all industries with the exception of power engineering and non-ferrous metallurgy. In 2002 only forestry and woodworking could avoid the downfall. At present, the most sharp decline in output occurs in construction industry, light and food industries.
However, the restrain of output proved to be insufficient in comparison with the decline in sales.
This development resulted in an absolute increase in finished stocks. The balance of change in evaluations of volumes finished stocks grew by 5 points and ceased to be negative in the industry at large. An increase in finished stocks was registered across the majority of industries. A decline in volumes of finished stocks was reported only in light and food industries. Evaluations of volumes of finished stocks taking into account the prospects of sales of products have changed even more dramatically. In January, the balance of assessments increased by 8 points and reached +21 %. Such a large excess of finished stocks has only several times been registered since 2001, when enterprises started to use stocks as a cushion compensating sudden changes in demand. At present evaluations “above norm” prevail across all industries.
Characteristic development in the beginning of the year was a sharp growth in costs borne by Russian enterprises. Over the quarter, the share of enterprises reporting an increase in costs grew from 45 % to 66 %. As a result, the balance of change in this indicator went up to +64 %, what is the record high in the last 16 quarters. The growth in costs made enterprises to increase prices even in the situation of falling demand. In January, the rate of rise in prices increased by 18 points and made +% (in terms of balance). According to the estimates of enterprises, prices have not grown so intensively in more than last 3 years. However, these measures did not result in an increase, or at least deceleration, of decline in profits. In January, the rates of decline in profits increased to –39 %, what is the worst value of the indicator registered since the start of the monitoring in February of 2002. A growth in profits persists only in power engineering.
Hopes for an increase in cash sales once again prevail in the Russia’s industry. After the pessimistic expectations registered in December, the balance of estimates has increased by 13 points and become positive. A growth in effective demand is expected across all industries with the exception of power engineering and forestry complex. The most optimistic forecasts are registered in chemistry, petrochemistry, and construction industry. The estimates concerning non-cash types of demand have also changed. On the whole, it may be expected that barter will decline less intensively, while promissory notes and offsets will slightly increase in the Russia’s industry.
The most pessimistic forecasts of changes in output in the post-default period were replaced by optimism characteristic of the last years. An increase in rates of growth in production may be expected across all industries with the exception of power engineering, which is already planning a decline in output due to the seasonal factors.
The planned growth in production will not be accompanied by an increase in employment.
According to managers, enterprises again experience excessive employment. Evaluations “less than sufficient” prevail only in mechanical engineering and light industry. Therefore, the balances of estimates concerning changes in the number of employed have remained negative since the beginning of 2002: plans to cut down the number of jobs prevail in the industry (especially in power engineering and non-ferrous metallurgy). In the nearest future, an increase in employment is possible only in construction and food industries.
S. Tsukhlo Foreign Trade In November of 2002, the Russia’s foreign trade turnover grew by 9.6 % in comparison with the figures registered in the respective period of the preceding year and made US $ 14.8 billion (according to the balance of trade methodology). However, in comparison with the figures registered in October of 2002 there was observed a decline both in imports and exports, therefore the amount of November turnover decreased by 6.9 % in comparison with the figures registered in the preceding month.
Figure 1. Main indicators of Russia’s foreign trade (in US bln.) -1997 г. 1998 г. 1999 г. 2000 г. 2001 г. 2002 г.
Balance Export Import As a result of temporary deterioration of trade conditions, the amount of exports in November turned out to be by 9.5 % below the October figures and made US $ 9.2 billion. This development is related to the fact that export of fuel and energy resources accounting for 56.7 % of the total amount of Russia’s exports is practically fully determined by the situation on world oil markets, which was rather unstable over the last few months. For instance, after the September hike in prices (Urals) up to US $ 27 to 27.5 per barrel, in October prices fell by 4.1 %, while in November they declined further by 11.% (down to US $ 21.4 per barrel) and were closer to prices observed in end-2001 – early 2002.
According to the results of the monitoring carried out in November and December of 2002, the price of Urals oil made US 24.92 per barrel, or US $ 181.92 per metric ton. Accordingly, the rate of Апр.
Июль Июль Июль Июль Июль Июль export duty on crude oil and crude oil products extracted from bitominous rock was reduced from US $ 29.9 per metric ton to US $ 25.9 per metric ton on February 1, 2003.
In November, the prices of Russian natural gas on West European markets grew by 44.6 % in comparison with the figures registered in November of the preceding year, but decreased by 0.8 % as compared with prices observed in October of 2002. Gasoline prices also grew significantly in comparison with the respective indicator registered in 2001, however, they decreased by almost 10 % as compared with the figures observed in the preceding month.
In November, the business situation on the markets of ferrous metals was characterized by balanced demand and supply. Prices of these products remained stable. Basic prices of reinforcing steel, commercial steel, and hot rolled steel in rolls remained at the level registered in October of 2002 and made in the end of the month US $ 250 to 310, 260 to 300, and 295 to 315 per metric ton respectively.
The prices of cold rolled steel in rolls made US $ 365 5o 395 per metric ton (an increase by US $ 35 to 45 in comparison with the October figures).
The business situation on the world market of non-ferrous metals in November was characterized by an increase in prices in comparison both with November of 2001 and October of 2002.
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