Page 47 - RusRPTApr20

Investment (% of GDP)
24.3 22.9 22.0 21.4 22.5 23.5 15.3
GDP: Gross fixed investment capital formation (USD mn)
471,337 496,982 428,573 276,240 280,350 342,294 58,303
source: CEIC
Russia’s growth in fixed investments accelerated in 4Q19. The revised quarterly data shows a continued acceleration in investment growth rates as the 12 national projects get underway. The level of investment is key to kick starting economy growth and ending the stagnation that Russia’s economy has been suffering from for most of the last five years.
Growth in fixed investment came in above the consensus forecast of 1% in 2019, up 1.7% year-on-year, reports Rosstat.
“Increased public spending was the key driver behind positive dynamic in fixed investment and end-2019’s improvement in GDP growth. These positive trends should run through 2020 – our base case – unless the C-virus stalls Russia’s recovery,” said BSC Global Markets chief economist Vladimir Tikhomirov in a note.
Fixed investment growth was up from 0.9% y/y in 1Q19, 1.2% in 2Q19, 1.7% in 3Q19 to 2.3% y/y growth in 4Q19.
Almost 40% of all fixed investment last year was made in 4Q19 as the government raced to spend on the national projects after a very slow start to the programme in the first half of the year.
The government is driving the investment programme, but companies are also playing and active role as the economy begins to recover and optimism on the economy outlook improves.
Over the whole of 2019 just over half (57%) of all investment were sourced from companies’ own funds, 16% from public funding and 9% from bank loans. Bank lending remains depressed and the high cost of borrowing has put companies off borrowing for investment programmes, but the Central Bank of Russia (CBR) has been cutting rates aggressively and if this trend continues then the share of credit in the investment capital mix may increase this year.
The resource industry remained the largest contributor in the fixed investment area with a share of 21%, followed by transportation (18%), manufacturing industry (17%) and utilities (10%), BCS GM reports.
Rosstat also upgraded its estimate of fixed investment growth in 2018 from 4.3% to 5.4% y/y.
“Public spending remains key,” says Tikhomirov. “In our base case scenario, we expect to see further improvement in the dynamic of fixed investment in 2020, with 5.8% y/y growth driven by a significant rise in public spending on national projects, particularly in the infrastructure area. This should allow the economy to accelerate by 2% y/y vs 1.3% in 2019. However, we admit that` the impact of the C-virus on the short-term prospects of global economic growth could alter Russia’s growth dynamic, as domestic and external demand weakens and the government finds itself under increased pressure to reassess
47 RUSSIA Country Report April 2020 www.intellinews.com