The Ukrainian Crisis of the Russian Industry. Episode II

On March 3-5, the Business Survey Department of the Gaidar Institute carried out an express-business survey as regards a possible impact of the negative scenario of military and political developments around Ukraine on output volumes. The past few days of the crisis were characterized by the following two important events: the referendum in Crimea and the subsequent inclusion of Crimea and Sevastopol in the Russian Federation. The above prompted us to carry out another business survey with the same question, but in principally new conditions.

The actual development of the crisis changed expectations of the Russian industry. Among the surveyed enterprises, there were fewer forecasts of restraining influence of the crisis on output volumes. If in the first business survey, such forecasts were registered with 46% of enterprises, at present they amounted only to 37%; the share of “there will be no particular effect” answers increased to 57%, while the forecasts of a positive effect amounted to 7%. So, the industry became less pessimistic in evaluation of the impact of the Ukrainian crisis on its output.

A detailed comparison of the results of both the surveys at the micro-level (it was possible to do that because almost the same enterprises took part in the business survey) showed that about 80% of participants preserved their forecasts of the impact of the negative development of the crisis on output volumes, while 17% and 3% of enterprises changed them for the better and for the worse, respectively.

The latest estimates show that the negative effect of the crisis is particularly strong in the Russian iron and steel industry, while the chemical industry and engineering revised their forecasts for the better, but still remained among the leaders as regards expectations of a drop in output. A decrease in output is possible at 30% of enterprises of the light industry.

Public statements by “our partners in the West” about target sanctions seem to have had an effect on evaluation of consequences by Russian enterprises. If in the first business survey, the industrial state sector expected the modest impact of the Ukrainian crisis on its output, at present such concerns among state-run enterprises are the most wide-spread. Joint-stock companies forecast twice as rarely a drop in output.

Dependence of growth in negative forecasts of the output dynamics on growth in the size of an enterprise prevailed, but all the size groups started to expect a less large-scale drop in output.

Summing up the results of both the express business-surveys on the impact of the negative development of the Ukrainian crisis on the output of the Russian industry, it can be concluded that, firstly, the escalation of the crisis will have negative consequences for the domestic industry, secondly, different industrial sectors will be hit by the Ukrainian crisis to a different extent and, thirdly, the specifics of state-building in modern Ukraine, bourgeois spinelessness of “our Western partners” and resolve of Russian authorities permitted enterprises to diminish the pessimism of the first business surveys.

Sergei Tsukhlo, PhD (Economics), Head of the Business Surveys Department