Home grown

Strong domestic demand is proving a boon for a number of manufacturing sectors. The machinery and equipment sector increased its output, with particularly solid growth in output of machinery and equipment used in housing construction and roadbuilding (including an approximately 70% year-on-year rise in output of bulldozers and cranes in March). Rising investment also explained much of the increase in output of electrical machinery and equipment, with demand for office and computing equipment surging. Consumer demand is also playing a role, as underlined by a sharp increase in the production of televisions.

Amidst this strong growth, the oil and gas industry--for years the economy’s mainstay--is struggling. Natural gas output rose by just 0.3% year on year during the first quarter, with independents faring little better the state monopolist Gazprom. Oil output rose by 4.2% over the same period, primarily owing to favourable weather conditions. Preliminary data for output growth in April show a return to more modest 1.8% year-on-year growth, or somewhat below the 2.6% increase in output recorded for the previous year as a whole.

Too fast to last

In the absence of a more vigorous performance from oil and gas, can this pace of GDP growth be sustained? The momentum behind the expansion of construction, manufacturing and a clutch of service-related sectors is certainly promising, and strong domestic demand will continue to drive the economy. However, base effects will have a less favourable impact in the rest of the year. Moreover, buoyant consumer demand will continue to fuel strong import growth and as a result net trade will exert an increasing drag on GDP growth.

As a result, full-year GDP growth this year is likely to be within the official government forecast of 6.5-7%. Faster economic growth is unlikely while energy output growth remains sluggish and while Russia’s large-scale investment needs are not--even now--being fully met. A range of problems in the business environment and competitiveness - eroding real rouble appreciation are further obstacles in the path of Russia’s economy. Still, in the context of the near stagnation of hydrocarbons output, Russia’s growth performance is surprisingly robust and well above the long-term trend rate.

Vocabulary:

fixed capital investment - инвестиции в основной капитал [в основные средства]

household consumption – потребление домашних хозяйств

disposable income - располагаемый доход, чистый доход

boon - выгода; благо; преимущество; удобство

TRANSLATION NOTES:

economic growth is likely to ease… - по-видимому (вероятно), темпы роста экономики замедлятся…(См. часть Ш, раздел 3, § 4, п.4.2)

robust domestic demand may ensure… - стабильный внутренний спрос, возможно, обеспечит… (См. часть Ш, раздел 3, § 3, п.3.1)

The central bank reports a 53.7% rise in the value of rouble credit last year, with foreign-currency loans up by a more modest 29.3%. - ….. стоимость кредитов в рублях увеличилась на 53.7%, причем сумма займов в иностранной валюте...(См. часть Ш, раздел 3, § 6, п.6.3)