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Pages: | 1 | 2 | 3 | 4 | 5 | ... | 39 | Part 2. The RealSector
2.1 ProductionMacrostructure
GDP Production: Dynamics andStructure
Goods and ServicesProduction
In 2001 the Russian economy is characterizedby a high and stable growth rate. According to 2001 totals, GDP rose by 5%compared with 2000, investments in capital assets - — by 8,2 %, andoutput in the manufacturing sector - — by 4,9 %. The risein the output of goods was ensured by the market for infrastructureservices emerged over the period of reform.In comparison with 2000, commercial freight turnover showed a 3,1%in, while wholesale trade grew by 5,2 %, and theoutput in the sector for communication services grew by 19,9%. While theproduction of goods grew by 6,5 % per year, the output in thesector for market services rose by by 4,1%.
The development ofmarket for consumer-oriented services is characterized byacceleration of growth in comparison with the prior year. In 2001, retailturnover grew by 10,8 %; the volume of paid services grew by 0,8%. So, in2001, the retail turnover growth rate exceeded the 1997pre-crisis rate at 11,4 %.
Against the background of economic growth,an evident asymmetry has emerged in regard to production growth, disposableincome, and final demand, which does not allow an unambiguous evaluation ofeconomic performance. With results of 2001 economic activitiesbeing undoubtedly positive, the comparison of major social developmentguidelines shows that the negative impact of the August 1998 recession uponRussian economy has not been eliminated entirely.
While in 1999-2000growth indemand in the household sector was restrained by low purchasing power rate, in2001 the situation reversed. The 19,8% rise in real wages and the21,4% growth in real pensions had a positive impact upon demand activityin 2001. Real disposable income rose by 5,9% in 2001. However, in spite ofactive social policy, living standard guidelines are still much lower thanthose of 1997.. In 2001, real income accounted for approximately 83,0% ascompared to 1997 level.
Table 1.
The dynamics of major macroeconomicvariables in the period 1997-—2001 (percent peryear)
Gross Domestic Product | 100,9 | 95,1 | 103,5 | 109,0 | 105,0 |
Base industries goods and servicesproduction | - | 94,2 | 104,6 | 108 | 105,7 |
Industry output | 102,0 | 95,1 | 108,1 | 111,9 | 104,9 |
Base capital investments | 95,0 | 93,3 | 105,3 | 117,7 | 108,7 |
Agriculturaloutput | 101,3 | 86,8 | 104,1 | 107,7 | 106,8 |
Freight turnover | 96,6 | 96,6 | 105,8 | 105,0 | 103,1 |
Retail trade turnover | 104,7 | 96,7 | 92,3 | 108,7 | 110,8 |
Foreign tradeturnover | 101,7 | 84,7 | 86,7 | 129,7 | 104,1 |
Real disposable income | 106,3 | 83,8 | 85,8 | 109,3 | 105,9 |
Source: Goskomstat, Russia (State StatisticsCommittee of Russia)
Fig. 1
Change in the real volume of GDP andgross value - added of sectors of the economy, as % to the respectiveperiod of the prior year.
Source: Goskomstat, RF Ministry of EconomicDevelopment and Trade
Fig.2
Contribution of the economy's sector between1999 to 2001, by quarters
The distinctive feature of 1999-2000consisted in the change in the shares of sectors of the economy. The economicrenewal was progressing alongside with positive dynamics of output of goods and services. The positive dynamics of GDP wasfixed in II Quarter 1999 and was hence secured by increase in basicindustries’ output.When industrial growth of the first half of 1999 compensated for the fall inproduction in the previous year, the noted tendency towards economic recovery was in place afterwards. The positive contribution ofcontrsuction and trade to the economic development growth rates enhanced from2000.
While analyzing the process of economicrecovery, we may divide the period in question into the following stagessubject to the degree of impact the factors have:
- Active import substitution between late 1998 through eraly 1999 determined by the Rb.devaluationprogressing within the framework of relatively low naturalmonopolies’ prices, asharp decline in import, and restrained growth in salaries andwages;
- Rise in external demand from the second half 1999 connected withbetter market prospects for fuel, energy sources and minerals; ;
- Rise in domestic demand for investment resources t from IIIQuarter 1999 determined byincrease in firms’revenue;
- Rise in domestic consumer demand from the second half 2000 causedby an activesocial policy.
At the first stage,consumer-oriented industries, which traditionally provedto focus on the domesticmarketfound themselves in advantageous position. The outputof consumer goods rose by 8,7 % in 1999 and exceeded the overall rateof ofgrowth in the industrial sector and the one in thethe retail trade turnover.. In 1999, the share of sub-sectors of the consumersectorin industrial production growth accounted for 13,2 %against 8,4 % in 1998.
Fig. 3
Dynamics of gross output of light and foodsectors between 1999-2001, as % to December of the prior year; the retail tradeturnover=1
In 200-2001, the impactconsumer industries had upon production growth remained unchanged resulted fromboth residual effects of import substitution inrelation to light and food industry and of currency devaluation inertia... Thecomparison of monthly dynamics of output of consumer goods shows agradual decline in the gap between the growth rate in light and foodindustries’ outputand dynamics of the retail trade turnover. It was the lightindustry whose reaction to to changes in domesticmarket situation was the most notable one. On the one hand, with purchasingpower growing, production expansion opportunities are restrained by technicaland economic characteristics of the sector’s production capacity. On theother hand, with the ruble exchange rate growing, the industry looses itscompetitive advantages and yields to import goods pressure. Whilein the 1st Quarter 2001 the import share in total nonfoodsresources accounted for 45,9 %, in the 3rd Quarter it rose up to 51,4 %.
The growth in investment demand appeared tobe a characteristic feature of the economic renewal. While financialperformance of firms was improving and their savings were growing, thedemand for capital goods proved to be increasing from late 1999.This particular tendency intensified in 2000-2001 under the influence of risingdemand on the part of export-oriented industries for domesticmachine-engineering goods. The output of investment complex grew byone- third over 1999-2001 compared to the 1998 level. Being subject todeveloped inter-sectoral relations, the production growth in machine -— engineeringindustry and the sector for construction materials ensured growth in theassociated industries’ output. The increase in domestic consumption of constructionmaterials had a positive impact upon production rate growth in metallurgical,chemical and timber industries.
The ongoing tendencyto growth in demand in the domestic marketcompensated for relative deterioration of the situation on foreign markets. Ifcompared to 2000, there was production growth in all the industrybranches. Negative factors of output dynamics in some industries manifestedthemselves in production stagnation in the ferrous metallurgy industry and gasindustry, which resulted from export reduction, and the decrease in the medicalindustry output, which was determined by import expansion. Once the output inmachine - —engineering industry grew by 8,4 % vs. 2000, the output innonferrous-metals industry accounted for 104,9 % and in oil and gas industryfor 107,2 %, and iron-industry output accounted for 99,8 %. The engineeringindustry share in total industry output growth in 2001 accounted for 35%, aswell as iron industry share was 20 %.
Table 2.
The dynamics of gross output withinindustries, 1998-2001 (in percent)
Industry | 98,4 | 108,1 | 109 | 104,9 |
Fuel-energy industry | 97,5 | 101,7 | 104,0 | 104 |
Ferrous industry | 93,5 | 111,3 | 113,4 | 102 |
Chemical and timberindustry | 95,3 | 119,8 | 112,3 | 104,2 |
Investment complex | 92,8 | 114,6 | 114,4 | 106,2 |
Consumer complex | 97,1 | 108,7 | 108,6 | 107,8 |
Source: according to Goskomstat data
Processing IndustrySector
The changes in the state of domestic andforeign market determined major structural changes in production. Thedistinctive feature of industrial growth in 1999-2001 consists in the excess ofprocessing industry growth rates over those of the mining industry. Processingindustry output increased by 38,2 % in comparison with 1998, as well as miningindustry output growth accounted for 16,6 %. Since 1999, processingindustries’ share inindustrial production structure has been rising.
Fig. 4
Change in dynamics of manufacturing andmining sectors, as % to the prior year
Investment demand growth offered anadditional incentive to the development of intermediate goodsindustries.
Fig. 5
Change in the structure of industrualoutput, as % for the respective period, in comparable prices
The rise in capital-makingindustries’ share inthe manufacture structure exerted a positive influence upon total investmentinfrastructure in national economy. There is an evident growth in outputproduced in almost each engineering industry. Instrument –making industry, communicationindustry, heavy engineering industries supplying the market with investmentgoods for transport, agriculture, oil industry are developing at the top speed.The rise in competitive capacity of domestic engineering industry, if comparedto the analogous foreign industries’ price level, facilitated theincrease in output of equipment for consumer industries. Ongoing productioncapacity optimization, restructuring of company’s assets, certification, andmastering new equipment allowed for the increase in output of such machinery asis necessary to substitute imported commuter cars, passenger cars, and electricengines.
Table 3
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