Page 66 - Russia OUTLOOK 2024

5.0 Real Economy
• 5.1 Industrial production and PMI
At the VTB "Russia Calls" forum in December, Vladimir Putin projected GDP growth of 3.5%, with Putin stressing a 54% contribution from the manufacturing sector, driven by defence, and a 44% contribution from supporting industries due to wage increases amid a labour market crisis and higher military spending. Real wages have grown by 7%, and disposable incomes by 4.4%.
However, there was no mention of declining labour productivity in 2022, forecast to grow by 1.7% in 2023. The government is shifting its perspective on low unemployment as a measure of economic health.
Kremlin largesse in 2023 was not so much investment in economic growth as in structural rebuilding: replacing lost imports, expanding the defence sector and creating a parallel transport and logistics infrastructure. Thus investment in manufacturing amounted to just RUB2.75 trillion, only a little higher than pre-pandemic levels. Investment in transport and logistics was also up – about on a par with the extraction industries. However, investment in wholesale and retail trade, as well as agriculture and construction, has declined – mostly as a result of the high borrowing costs.
Industrial production recovered in 2023 on the back of heavy state spending but data released on December 1 showed that growth slowed from 5.6% y/y in September to 5.3% y/y in November (consensus: 5.1%).
The contraction in mining eased to -0.1% y/y and manufacturing growth slowed from 10.9% to 9.5%. RosStat reported a 0.4% m/m fall in overall industrial production last month, which continues a period of relatively sluggish performance at a time when supply constraints are biting.
In the second quarter of this year capacity utilisation hit 80.9%, the highest since records began in 2000. In the third quarter, it decreased slightly to 80.7% due to a slowdown in investment. However, if we take manufacturing on its own, which includes the production of military goods, utilisation remains at a six-year high, reports The Bell.
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