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Although the calculations demonstrated that in March output increased at the rates outpacing demand at 28 per cent of enterprises (what is above the average level observed in the preceding year), these developments did not result in an increase in the excessiveness of finished stocks. Moreover, both the respective balance of assessments, and the share of normal evaluations declined by one point. Either the volumes of finished stocks in industry did not increased in the situation of high demand, or enterprises expect the persistence of high rates of growth in demand and therefore ventured to increase the volumes of their finished stocks without revision of the respective assessments. In March, a lack of finished stocks was registered in metallurgy and food industry.

High rates of growth in demand have created the conditions, under which enterprises achieved positive financial results of their activities. In March, surveys registered a rise in profits in the Russian industry. It should be noted that for the first time the balance of changes in profits has turned out to be positive both before, and after the adjustment for the seasonal factors.

In anticipation of the May holidays, the forecasts of changes in demand declined by several points;

however, after the adjustment for the seasonal factors the confidence of forecasts persisted at the previous, the highest since year 2000 level. The surveys registered worsening forecasts only in electrical power engineering, forestry complex, and light industry.

A similar situation has formed as concerns the plans of output: these plans remain the most confidential across the industry for all 154 surveys. The share of reports indicating the intent to increase output has reached 69 per cent in ferrous metallurgy, 68 per cent in mechanical engineering, and per cent in construction industry. The March production plans of enterprises were supported by forecasts of demand at 72 per cent. In 2004, at the average the production plans of enterprises were supported by demand at 70 per cent, in January of 2005 this figure made 64 per cent and in February per cent. By the end of the 1st quarter of 2005, the share of the production plans not supported by demand (or more exactly, the share of the plans outpacing demand) declined to 23 per cent, while in the beginning of the year this indicator was at 30 per cent. As it has turned out, only 6 per cent of enterprises were not able to catch up to the demand for their products: the expected rates of changes in their output lag behind the forecasted rates of changes in demand.

S. V. Tsukhlo Factors of Economic Growth in 1996 Through The decomposition of economic growth into its extensive and intensive components permits to evaluate the quality of growth and prognosticate the further trends of economic development. The most important issue here is the dynamics of the total factor productivity (TFP), which characterize the intensive components of growth. In the preceding IET studies it has been demonstrated that TFP declined in the beginning of the transition period. However, the turn of the trend from downfall to growth occurred in 1995 and 1996, what had been somewhat earlier than the aggregate output began to grow16.

As concerns the dynamics of labor and capital inputs, the turning point was 1998 and 1999. Starting from this period, the involvement of labor and capital in the process of production intensifies. To a significant degree, the growth in GDP resulted from more intensive utilization of production capacities, growing employment, and the average duration of the working day (worked hours), as well as increasing investment in fixed assets. However, throughout this period the bulk of the growth remains unexplained, i.e. it was caused by other unaccounted for factors and a growth in productivity.

Table 1 and Figure 1 present the results of decomposition of the GDP growth (it should be noted that the data for year 2004 are preliminary estimates).

As the decomposition discussed above demonstrates, 14.8 per cent of the growth of GDP registered in 2004 was determined by the changes in labor costs, 24.2 per cent of this growth resulted from the changes in the amount of capital involved in the process of production. The better part of the growth remains unexplained by the dynamics of the major factors thus characterizing the TFP dynamics.

The trend towards an enhancement of involvement of capital in the process of production, which became perceptible in 1999, persisted in 200417. The most positive fact is the growth in contribution of newly commissioned equipment replaced a more intensive utilization of existing capacities.

For details on the methodology see the IET paper Faktory ekonomicheskogo rosta (Factors of economic growth), Working Papers series No. 70, IET, M. 2003, 390 pp., www.iet.ru.

A preliminary estimate based on the investment in the fixed assets.

Table 1.

The structure of GDP growth rates as broken down by years 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004* Rates of Growth GDP -8,7 -12,7 -4,1 -3,6 1,4 -5,3 6,4 10 5,1 4,7 7,3 7,I. Factor inputs -5,3 -7,91 -1,97 -2,62 -1,46 -1,1 2,66 3,23 1,53 0,95 2,46 2,I.1 Labor -2,33 -2,91 -0,93 -1,67 -0,34 -0,5 0,81 0,4 0,25 0,31 0,24 1,Employment -0,68 -1,46 -1,24 -0,28 -0,84 -0,58 0,09 0,19 0,21 0,38 0,19 0,Worked hours -1,65 -1,45 0,31 -1,39 0,5 0,08 0,72 0,21 0,04 -0,07 0,05 0,I.2 Capital -2,97 -5 -1,04 -0,95 -1,12 -0,6 1,85 2,83 1,28 0,64 2,22 1,Fixed assets 0,3 -0,11 0,06 -0,06 -0,22 -0,23 0,06 0,27 0,39 0,43 0,54 0,Capacity utilization rate -3,27 -4,89 -1,1 -0,89 -0,9 -0,37 1,79 2,56 0,89 0,21 1,68 0,II. TFP -3,4 -4,79 -2,13 -0,98 2,86 -4,2 3,74 6,77 3,57 3,75 4,84 4,In per cent of the rates of growth in GDP I. Factor inputs 100 100 100 100 100 100 100 100 100 100 100 I.1 Labor 60,92 62,28 48,05 72,78 -104,29 20,75 41,56 32,30 30,00 20,21 33,70 39,Employment 26,78 22,91 22,68 46,39 -24,29 9,43 12,66 4,00 4,90 6,60 3,29 14,Worked hours 7,82 11,50 30,24 7,78 -60,00 10,94 1,41 1,90 4,12 8,09 2,60 10,I.2 Capital 18,97 11,42 -7,56 38,61 35,71 -1,51 11,25 2,10 0,78 -1,49 0,68 4,Fixed assets 34,14 39,37 25,37 26,39 -80,00 11,32 28,91 28,30 25,10 13,62 30,41 24,Capacity utilization rate -3,45 0,87 -1,46 1,67 -15,71 4,34 0,94 2,70 7,65 9,15 7,40 13,II. TFP 37,59 38,50 26,83 24,72 -64,29 6,98 27,97 25,60 17,45 4,47 23,01 10,I. Factor inputs 39,08 37,72 51,95 27,22 204,29 79,25 58,44 67,70 70,00 79,79 66,30 60,* - preliminary estimates.

Note: evaluation of the capacity utilization rate was carried out on the basis of measurement of consumption of electrical power.

- - -1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Fig. 1. Decomposition of the GDP growth by factors in 1993 through It should be noted that in the terms of decomposition of the growth of cost indicators, such as GDP, the conception of TFP is somewhat different from the traditional conception of productivity related to technologies (for instance, productivity of labor). The cost evaluation of productivity co , % incides with the physical one only in the case the economy is in the situation of long term equilibrium and perfect competition. In other words, all possible exogenous shocks are taken into account in the current equilibrium of the system. It is apparent that these conditions are too rigid as concerns the Russian economic system taking into account the volatility of oil prices and the fact that the evaluations were made over a short period of time. Therefore, the evaluation of TFP will include not only changes in the technology and efficiency of management, but also changes in the price situation. In a short time period, the factors related to the business situation may have a much more strong impact on growth as compared with the technological ones.

Figure 2 graphically demonstrates the dependence of the growth in output (evaluation of TFP) unexplained by the major factors on the oil prices.

y = 0,1059x + 0,R2 = 0,2002 ----40 -200 , % Fig. 2. Comparison between the rates of increase in TFP and world oil prices in 1993 through Using this relationship, it is possible to conventionally divide the residual not explained by the factors of labor and capital (evaluation of TFP) into the growth determined by the dynamics of world oil prices and the ultimate residual. The latter rather characterizes the changes in the technological productivity, i.e. the intensive component of the growth in output. Certainly, it is a rather approximate and indirect evaluation of the contribution the oil prices made to the economic growth. There are possible alternative evaluations. Our evaluation is based on the decomposition of growth and simple econometric assessment. In the framework of this methodology, only a short time (within one year) influence of the world price situation on the growth is taken into account. More long term relationships, including the Dutch disease effects, are not taken into account.

The results of decomposition of the GDP growth taking into account the oil price factor are presented in Figure 3.

, % - - -1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Fig. 3. Decomposition of the GDP growth by factors in 1996 through 2004 evaluated for the impact of oil prices.

The obtained results significantly differ from those shown above. The most significant differences are observed as concerns the data for years 1998, 1999, 2000, as well as 2003 and 2004. Thus, for instance, the decline in GDP registered in the crisis 1998, in accordance with the obtained evaluations, was primarily caused by the fall of oil prices. In 1999 and 2000, there was observed practically no increase in productivity, while the growth unexplained by labor and capital was generated by the rise of oil prices. At the background of the increase in oil prices, the achievements of 2003 and especially 2004 seem much less optimistic. Taking into account the contribution of oil prices, in 2004 there was observed a significant slowdown of the rates of increase in productivity. In the case this trend persists, taking into account the prognosticating qualities of TFP, a slowdown in the rates of growth in GDP may be expected in the nearest future.

Ye. Astafyeva, O. Lugovoi Foreign trade As before, the world market conjuncture exerts favorable influence on the development of the Russian foreign trade. Though, in comparison with the December 2004, in January 2005 there happened common with the first month of the year fall of major foreign trade indicators, their growth rates remain at a high level. In January this year the volumes of both export and import are considerably higher than similar indicators of the past 10 years.

In January 2005, the Russias foreign trade turnover, calculated according to balance of payment methodology, made up (in actual prices) USD 21.9 bn, having increased in comparison with the first month of 2004 by 31,9%.

As before, the basis of trade turnover is formed by exports outside of the Commonwealth of Independent States, which, in comparison with January 2004 increased by 41,1%, making USD 13.4 bn.

Exports to CIS countries had grown not so much only by 4,6% and amounted USD 1.8 bn. On the whole, the Russian exports in January 2004 made up USD 15.2 bn., which is by 35,43% greater than in January 2004, and by 21,2% less than in December 2004.

, % 2000 2001 2002 2003 2004 Balance Export Import Source: Goskomstat of the RF Fig. 1. Major Indices of the Russian Foreign Trade (bn dollars) As before, the high growth rates of Russian export are determined by exclusively favorable world market conjuncture. Considerable rise in prices had been observed on the world markets for metal and energy sources. There was also rise in prices of chemical, forest and pulp-and-paper products.

In January 2005, the monthly average world price of oil Brent reached USD 45.01/barrel, that is by 43,6% higher than similar January 2004 indicator, December 2004 by 13,5%. The world price of Russian oil Urals reached USD 40.08/barrel and increased, as compared to January 2004, by 38,9%, while to December 2004 by 13,6%.

Because of continuing growth of the world prices on oil market, since April 1, 2005 the oil export duty will be set in Russia at the rate of USD 102.6 per ton. This figure had been obtained proceeding from average oil price in January-February 2005, which reached USD 40.47/barrel or USD 255.44 per ton. This is a maximum duty ever used in Russia. Since December 2004 to January 31, 2005, the size of duty made USD 101 per ton. From February 1 to March 31, because of certain falling in oil prices on the world market the oil price had been lowered to USD 83 per ton.

The rate of export duty on oil products will also be changed, in April the export duty on light oil products (benzol, toluene, oils, propane, butane etc.) is increased from USD 68.2 to USD 81.4 per ton.

Duty on dark oil products (fuel oil and other liquid fuels) is also increased from USD 36.7 to USD 43.8 per ton.

In January 2005, the Russian contract prices for natural gas remained at a level of December and were by 12,2% higher than in January 2004.

In December 2004, the monthly average price of aluminum on the London Metal Exchange amounted to USD 1849 per ton, in January 2005, on average USD 1832 per ton. China the largest producer and consumer of this metal in the world, continues to exert considerable influence on the world aluminum market. An important event of January became publication of the production indicators and export-import of non-ferrous metals in China for 2004. China accounts for a quarter of their world production and consumption. In 2004, the production of aluminum in China achieved 6,5 million tons. Which by 20,2% greater than in 2003. The export of primary aluminum increased by 36% and reached 1,4 mln tons, the import had grown by 28% to the level of 698 thou. tons. Another important event for the world metal market became introducing by China, since January 1, 2005, 5% export duty on aluminum, which may lead to considerable reduction of aluminum deliveries to the world market, and to rise in prices.

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