Trend Towards Drop in Investments in Capital Assets Intensifies

According to the preliminary estimate of Rosstart, in the 1st quarter of 2013 growth in GDP amounted to 1.6% year on year against 4.8% in the same period of the previous year. Slowdown of economic growth is caused by a simultaneous drop in demand on the domestic and foreign markets. From the 2nd quarter of 2012, absolute reduction of volumes of Russian export in value terms was registered. As a result, during the last three quarters of 2012 and the 1st quarter of 2013 the value of the trade balance decreased.

From December 2012, reduction of investments in capital assets has had a considerable effect on the domestic market: in April 2013 and January-April investments amounted to 99.3% and 99.8% of the respective indices of the previous year, respectively.

 

In the 1st quarter of 2013, a trend towards reduction of government capital investments -- which trend was formed in 2012 - prevailed. Reduction of government investments was supplemented by weakening of activities of large infrastructure companies due to completion of a number of investment projects and adjustment of plans with expected changes in the market situation taken into account. In January-April 2013, reduction of enterprises' revenues intensified the trend of a drop in investments in capital assets. Weakening of business activities in the investment sector is related to growth in capital flight to $25.8bn in the 1st quarter of 2013 against $7.9bn in the 4th quarter of 2012. Unlike the 1st quarter of 2012, capital flight in 2013 is virtually justified in full by outflow of banking capital which situation weakened a great deal banks' participation in financing of investments in capital assets in Russian economy.

 

In the 1st quarter of 2013, foreign investments in Russian economy increased 1.65 times over as compared to the same period of the previous year and amounted to $60.4bn, including $6.3bn worth of direct foreign investments. Unlike the previous year, in the 1st quarter of 2013 growth in direct investments took place as a result of sharp increase in the volume of loans received from foreign co-owners of business entities with investments in capital reduced.

 

О.I. Izryadnova, Head of the Structural Policy Department