BOFIT Viikkokatsaus / BOFIT Weekly 2017/48

Fixed investment grew by over 3 % y-o-y in the third quarter, down from growth above 6 % in the second quarter. Investment was up by 4.2 % y-o-y in the first nine months of 2017.

Especially the recovery in fixed investment of large and medium-sized firms, as well as government investment, slowed in the third quarter. In the first nine months of the year, the growth was just around 1.5 % y-o-y. Within-year statistics mainly cover these investments. In turn, Rosstat estimates investments by other entities such as small firms, grey economy actors and households. Rosstat says that the recovery of the estimated investments remained fast, holding at a pace of around 12 % y-o-y in January-September.

The recovery in the statistically recorded investment, however, has a narrow basis. After a couple years of decline, investment in pipeline transmission increased by over 25 % in January-September. Without this growth, recorded investment would have shown no increase, and total investment growth would have been about 3 %.

The electricity sector has been a major drag on the recovery in investment with the sector's recorded investment falling in January-September by nearly 10 %. Manufacturing (excluding oil refining) also saw investment fall by about 6 %. Sharp drops in fixed investment were registered in a few large manufacturing branches, most notably metal industries. Investment in oil & gas production contracted by 1 %. Third-quarter investment in oil refining showed a sharp increase after a couple years of steep decline.

Due to the transport sector the investment recovery has had regional focuses. In the first nine months of the year, well over half of the increase in investment came from the City of Moscow (much of that were investments in land transport projects). Additionally, about 30 % of investment growth was generated in the Amur region (Power of Siberia gas pipeline) and Crimea (Kerch Strait Bridge).

Real volume of fixed investment in Russia, 2010–17

Source: Rosstat.