Re: Russia’s economy
On May 11, 2007, at 1:46 PM, Chris Doss wrote:
What companies have India and China created that count for anything on a global scale?
Lenovo took over IBM’s PC division, for heaven’s sake. Haier is =
spreading around the world. Mittal is of Inidian origin, if not =
literally Indian. But Russia shoulda/coulda done better, if it had =
managed the Soviet inheritance better.
Leave aside the company question. What are the leading sectors of the =
Russian economy?
Here’s what the World Bank said in its latest Russian Economic Report =
http://ns.worldbank.org.ru/files/rer/RER_12_eng.pdf, which is =
unfortunately a year old:
Annual data confirm trends in manufacturing that were identified in =
the previous RER. The vast majority of manufacturing sectors showed marked slowdowns in =
economic growth in 2005 relative to 2004. This particularly concerns sectors producing =
tradable goods in competition with foreign producers. Of these sectors, the food =
industry continues to show resilience, expanding at the same pace as in 2004 (4.4 percent). =
The consumer electronics industry grew significantly, but almost certainly due to lower =
import tariffs on parts than final products. The strongest decline was registered in machine- =
building, where growth slowed from over 20 percent in 2004 to -0.1 percent in 2005. (Figures 1 - 4).
[…]
Capacity constraints have become increasingly important in =
industry, particularly in resource extraction. Although the oil industry also suffered in 2005 from =
the disruptive effects of the Yukos affair, most experts expect slow growth from this sector over =
the medium term due to capacity constraints that can be alleviated only through high fixed =
investment. The slowdown in manufacturing appears to be related to increasing =
competitive pressures from the rapid appreciation of the ruble (Figure 9). Although the =
interpretation of official Russian financial data for enterprises is difficult, these figures =
nevertheless give an indication of possible huge swings in relative profitability across different =
sectors of the economy (Table 3). According to these data, aggregate growth in (nominal) net =
profits in manufacturing during 2005 was only slightly higher than inflation (16 percent), =
while profit growth in trade, finance, transportation and communication, construction, and =
(especially) resource extraction were considerably higher.
[…]
Although Russia has experienced double-digit fixed capital =
investment growth for the third consecutive year, absolute investment levels remain low in Russia =
relative to emerging market economies that have sustained growth over a number of =
years. In 2005, fixed capital investment constituted only an estimated 18 of GDP, whereas =
countries that have sustained rapid growth usually have associated investment rates of 25 percent =
or higher. Investment also remains quite concentrated in oil and gas (=91transportation=94 =
includes pipeline investment). As illustrated in Tables 5 and 6, most manufacturing sectors of the =
economy receive rather low shares of investment and FDI. Although manufacturing on =
aggregate received a relatively large share of FDI in 2005, this was due entirely to =
exceptional investment in oil processing associated with the Sibneft deal.
[…]
Despite the strong economic growth and other positive trends in =
recent years, Russia continues to face a challenging development agenda. This includes =
spatial imbalances, deteriorating infrastructure, still low investment rates, social =
distress in many regions, a demographic crisis, and problems in supporting the competitiveness =
of manufacturing industries.
[…]
Poor health detracts from the quality of life of a large portion of =
the Russian population, restrains economic development, and is an important component of =
the growing demographic crisis in the country. A recent World Bank report, =93Dying Too =
Young=941, investigated the exceptional problems of mortality and morbidity among the Russian =
working age population, and outlined some distressing implications for future economic =
development. Recently, the government has made improving health care a major political =
priority, and new data available for 2004 indicate that recent sharp increases in =
household incomes and declines in poverty may be having at least some affect on mortality rates. =
Still, Russia continues to face tremendous challenges in confronting its demographic and health =
crisis, reforming the health system, and changing the unhealthy life styles of much of the =
population. The rapid spread of Tuberculosis and HIV-AIDS presents a particular future health =
threat, compounding the already high toll imposed by non-communicable diseases such as =
cardiovascular conditions, cancer and injuries. This note summarizes some results from =93Dying =
Too Young=94, other recent information, and outlines the nature of the implied future =
challenge to the country.
The countries of the former Soviet Union share, with sub-Saharan =
Africa, the dubious distinction of comprising the two major regions of the world in =
which life expectancy has been declining. In the Russian Federation, female life expectancy =
(72 years) is close to the level of 1955; male life expectancy (59 years) is three years less =
than in that year, and is now at the same level as in Eritrea and Papua New Guinea. Until 2004, =
declines in life expectancy in Russia contrasted sharply with strong growth in incomes and =
poverty reduction since 1998 (Figure 3.1). Even with the positive dynamic exhibited in 2004, =
average life expectancy in Russia only rebounded to the low level of 2000 (65.3 years). This =
can be compared with a 78 year average in the European Union.