By Darya Korsunskaya
LONDON (Reuters) – Russia’s industrial manufacturing and investments are stagnating, its exports of products are persevering with to deteriorate and profitability in most industries is declining, a suppose tank near the federal government has mentioned in a report.
The Centre for Macroeconomic Analysis and Short-Term Forecasting issued its downbeat evaluation on Saturday, additionally warning a couple of scarcity of imported parts and uncooked supplies.
Despite Russia’s ongoing struggle in Ukraine, its financial efficiency final yr exceeded the expectations of officers and analysts. But in its month-to-month evaluation of macroeconomic tendencies for April, the centre mentioned it noticed indicators of a deterioration in lots of indicators on the finish of 2023 and the start of 2024.
The rising tendencies are a trigger for concern, it mentioned, whereas long-term challenges to the financial system want options “here and now.”
“In most of the main types of activity, the transition to stagnation has either already occurred or is increasingly visible,” it famous, including that prime rates of interest have been starting to sluggish the expansion of client demand, seen as a key driver of financial progress.
In January and February, client exercise fell by 0.2%, excluding seasonality, in keeping with suppose tank’s knowledge.
February was the fourth month in a row when funding exercise had stagnated, it added, one thing it partly blamed on what it known as the exhaustion of earlier “growth ideas”.
Earlier funding tasks have centered on infrastructure, import substitution, the military-industrial advanced and housing, however lending circumstances are actually tighter and profitability in plenty of industrial sectors has dropped.
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Profitability may fall additional, hurting funding prospects much more given the difficulties of private-public co-financing tasks, the centre warned.
Import restrictions as a consequence of Western sanctions over the struggle in Ukraine and issues with funds have been an extra impediment as some companies have been critically depending on the provision of parts and uncooked supplies, it mentioned.
“The possibilities of ‘cheap’ (non-capital-intensive and non-innovative) import substitution have largely been exhausted. Next, investments are needed,” the report said.
Russia can no longer rely on energy revenues and cheap labour for economic growth due to sanctions on hydrocarbons and a shortage of personnel, it said.
One solution, the report suggested, would be to increase labour productivity by further automation and the greater use of digital technology and robots.