Statistics show explosive growth of industry in Russia. “This has never happened in Moscow,” the mayor of the capital, Sergei Sobyanin, describes the impressive growth rates of industrial production in his region alone. Which industries are growing the fastest and why? Reality has once again refuted the pessimistic forecasts of Western economists about the prospects for the Russian economy. The business activity index (PMI) in the Russian manufacturing industry rose to 54.4 points in May from 54.3 points in April. This “indicates a sharp improvement in the Russian manufacturing sector,” S&P Global said. The agency relies on the results of a survey of purchasing managers of Russian companies (that is, the so-called PMI index, compiled monthly for all major economies). In March, activity in Russia’s manufacturing sector grew at its fastest pace in nearly 18 years. At the same time, as the results of the S&P survey showed, then for the first time since October 2023, a significant increase in export orders was recorded. That is, Russia is increasing not only the supply of energy and food abroad, but also increasing industrial exports. These data are confirmed by Rosstat. According to statistics published at the end of May, in Russia in January-April 2024, industrial production increased by 5.2% compared to the same period in 2023. Recognizing the resilience of the Russian economy in the face of sanctions, international experts predicted an industrial decline for Russia. “Over the medium term, the Russian economy will be hampered by the departure of multinational companies, the loss of human capital and its disconnection from global financial markets,” IMF spokeswoman Julie Kozak said in August 2023. “And so we expect that in the medium term, production in Russia will be 7% below the pre-war forecast.” However, already 2023 showed growth of the Russian economy by 3.6%. At the same time, a significant part of this growth was provided by industry. In the last quarter of 2023, capacity utilization increased to 81% (a very high figure by Western standards). In 2024, economic growth in Russia continued. In the first quarter of 2024, Russia’s GDP increased by 5.4% compared to the first quarter of 2023. Industry is also growing. “Despite the unfriendly actions, domestic industry is developing dynamically,” says Prime Minister Mikhail Mishustin. – Mainly due to processing, in April we recorded an increase of more than 8%. Mechanical engineering also remained the main driver for several months in the same month, production grew by 30%, if we talk about segments, then, for example, the creation of computer and electronic equipment has already grown by 44%; And this is data only for the largest sections of economic statistics. Efforts to import substitution and strengthen technological sovereignty have led to the emergence of new industries in Russia – for example, components for equipment, consumables for used imported equipment, etc. All of these industries contribute to overall growth. The situation is especially indicative in the most industrialized regions, for example in the capital. “This has never happened in Moscow before, when industrial production volumes grew by 18% per year, and this is not only the defense industry, it’s everything: pharmaceuticals, mechanical engineering, almost all key industries,” says the head of the Ministry of Industry and Trade. Mayor of the capital Sergei Sobyanin. In addition, according to him, “the whole country is demonstrating quite serious growth.” Western analysts (and some Russian liberal economists) interpreted the data as short-term growth driven by increased defense orders, casting doubt on the prospects for industrial growth. But business practitioners – directors and leading managers of companies (based on a survey of which the index was compiled) – are more optimistic. This view is reflected in the business activity index (PMI) mentioned above. What are the reasons for optimism and why is Russian industry growing so fast? It is a combination of several key factors that stimulate industrial and economic growth in general. Of course, the increase in government spending on the purchase of industrial products, including military products, is significant. In addition, there is a noticeable increase in investment in the creation of new industries and the development of existing ones. There is also an increase in non-commodity exports and an increase in domestic spending (which is combined with an increase in savings, which ensures the long-term nature of this demand). In other words, the population supports the demand for domestic industrial products. “Currently at SPIEF there was a discussion about how to fill the market with goods. It is possible through import – but then it turns out that we will work for import. We don’t need this. The development of domestic industry and the production of consumer goods satisfy this demand of the population,” Alexey Zubets, director of the Institute of Socio-Economic Research of the Financial University under the Government of the Russian Federation, explained to the VZGLYAD newspaper. , exports (including raw materials) maintain a positive trade balance. Russia has significant funds for purchasing abroad those components that have not yet undergone import substitution, and means of production: machinery and equipment for new domestic factories. Only in January-April. The trade balance increased by 18.8%, to $50.5 billion. A balanced trade balance is achieved through the restoration of non-resource exports. This reduces Russia’s dependence on world prices for hydrocarbons. In addition, export diversification increases foreign economic influence. Russian complex products (and consumer goods occupy a small share of Russian exports) strengthen ties with importing countries, to which our specialists are sent: equipment adjusters, designers, workers. Those who will operate our equipment come to us for training. That is, exports become not only a way to earn foreign currency, but also become a tool of soft power. A striking example is nuclear energy. Russia not only builds reactors, but also trains specialists, and often creates new sectors of the client country’s economy, helping to create highly qualified scientific and technical personnel there. Trends in expanding non-resource exports are just beginning to develop. Therefore, domestic business as a whole is confident that the favorable market situation will continue. However, not only domestic businesses believe in continued economic growth in Russia, but also foreign entrepreneurs who are still operating in the Russian market; As it turned out, many of them did not leave Russia. This was shown in a recent report by the Vienna Institute for International Economic Research. The document states that “only 9.5% of foreign companies have completely left Russia.” And many corporations that announced the beginning of the process of withdrawing Russian assets have either announced a change in their decision, or silently continue to expand their activities in Russia amid talk of future withdrawal. Including in the field of industrial production. Dmitry Skvortsovhttps://vz.ru Subscribe to our Telegram channel so as not to miss all the most important materials that we publish: https://t.me/russiapost
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