Page 36 - RusRPTJun19

4.4 Fixed investment
Russia -Fixed capital investment 2012 2013 2014 2015 2016 2017 Mar-2018
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
The low levels of investment is Russia’s Achilles’ heel. What investment there is, is dominated by the state and is concentrated in a few mega-projects organized by the likes of Gazprom. At the same time foreign direct investment (FDI) is depressed and once the re-investment of profits earned by foreign companies already present in Russia (which counts as FDI) is excluded then FDI is current negative. As bne IntelliNews has argued elsewhere, Russia’s businessmen – both domestic private investors and foreign – are suffering from a crisis of confidence in the Kremlin and are sitting on their hands.
Investment activity remains rather weak, increasing by 4.1% in 2018
(4.8% in 2017). This is especially relevant with respect to private investments, which must be a vital indicator not only of the stability of economic development itself, but also of the level of confidence in the government’s socioeconomic policy. Foreign direct investment in the non-financial sector has hit a new low for the past two decades — $1.9bn (only 1994 was lower at $0.6bn).
Chairman of the Accounts Chamber, Alexei Kudrin, said that the government’s plan to increase investments to 25% of GDP would most likely not be fulfilled. In his opinion, the implementation of this plan is hampered by the general investment climate, sanctions, caution in carrying out structural reforms, and tax increases. A plan to raise the level of investment in the Russian economy to 25% of GDP by 2024 was approved by the government in July last year. In 2018, the ratio of investment in fixed assets to GDP was 20.6%, the Federal State Statistics Service reported.
36 RUSSIA Country Report June 2019 www.intellinews.com