Page 18 - RusRPTApr23

(+0.4%), and the processing industry shrank by -2.4% on average. Sectoral variations
were very large. Sectors that serve domestic demand and warfare, such as the pharmaceutical industry (+ 8.5%) and the manufacture of metal products (+ 6%)
grew rapidly.
On the other hand, the wood
processing industry (-12.8%) and the automotive industry (-45%) which were affected by the sanctions, shrank significantly.
The growth of public investments was
reflected in construction, whose value added increased by 5%. General administration grew by 4% from a year ago.
“Rosstat's data on January's
economic development do not point to a quick turnaround. Compared to a year ago, the retail trade continued to contract clearly (-6.6%), but the monthly change was positive in January after the drop in December,” BOFIT said. “On the
other hand, the indicators describing the demand for household services (e.g. hotel, tourism and restaurant services) continued their strong growth that started last year.”
In January, the production of the
processing industry shrank by 2% from a year earlier, and the production of the extractive industry by as much as 3%. In particular, natural gas production (-14%) and LNG production (-13%) shrank sharply. In January, crude oil production was 1% lower than a year earlier.
One of the biggest causes for
concern was the collapse of budget revenues in January, driven by a 46% fall in
oil and gas receipts, coupled with a very big surge in spending, that left the budget with a RUB1.76 deficit – its biggest deficit since 1998 and more than half the expected deficit for the full year.
Analysts say the situation is likely
to rapidly improve in the coming months as the spending surge was a one-off after the Ministry of Finance (MinFin) frontloaded some of the year’s spending, instead of putting it off to the end of the year as is usual. Also there were changes to the tax code that also affected income. However, the fall in oil and gas revenues is real and likely caused by a shock to the energy market caused by a new EU embargo on Russian oil products that came into effect on February 5. Analysts say that if the energy market had the
same evolution to a similar shock in the first months of the war a year ago, when Western traders abruptly stop buying Russia’s Urals blend of oil, then oil and gas revenues should recover in the next few months as the market finds a new equilibrium. Nevertheless, S&P reports that the export of Russian oil products slumped in February as the new shock arrived.
“In January, the income of the
federal budget fell drastically from a year ago. The increase in spending
18 RUSSIA Country Report Russia April 2023 www.intellinews.com