Page 35 - bne IntelliNews Russia Country report May 2017

4.4 Fixed investment
Russia -Fixed capital investment 2010 2011 2012 2013 2014 2015 2016
Fixed Capital investment change y/y
6.3 10.8 6.8 0.8 -2.7 -8.4 -0.9
GDP: Gross fixed investment capital formation, (local currency)
10,472,700 13,982,500 15,223,900 15,077,000 16,436,100 16,812,800 18,112,400
source: Rosstat
First estimate of fixed asset investment growth in 1Q17 is +2.3% y/y. The value of construction works completed agrees with stronger investment, as it improved to -0.4% y/y from -5.0% y/y a month earlies.
While the figure looks strong, Alfa Bank says it has a couple of issues with the result.
First, the 2.3% y/y figure includes the results of investments in unobservable sectors : for the observable segments, investment growth came in at just 0.4% y/y. This suggests that the main area of investment recovery could not be identified, which leaves a high level of uncertainty with regards to the figure per se (could it be subject to a revision later?), and also the nature of activities behind it.
Second, the breakdown of the investment growth by segment points to the fact that in the agriculture sector , one of few areas to benefit from ruble depreciation and sanctions and one which generated growth in 2015-16, investment decreased by 6.9% y/y in 1Q17 after growing by 4.2% y/y and 10.6% y/y, respectively, in 1Q16 and 2016. We view this news very negatively.
Third, the main area of investment growth was in the transportation segment (up 21.7% y/y); this could be positive news if driven by private demand, however it may also reflect the state projects. All in all, Alfa prefers to rely more on investment dynamics, which is reported as a part of GDP data by consumption breakdown and which should be published in the beginning of July. The key takeaway from yesterday’s Rosstat publication is rather negative because of the decline in investment in the agriculture segment.
35 RUSSIA Country Report May 2017 www.intellinews.com