BOFIT Viikkokatsaus / BOFIT Weekly 2019/36

Growth in fixed investments in the first half of this year cooled off to 0.6 % y-o-y, the slowest pace since growth remained at a halt in 2016. Fixed investments by large & medium-sized firms and the government fell by about 1 %. In 2017−18, investment growth in these categories also clearly lagged growth in fixed investments in other categories.

Fixed investments of large & medium-sized companies and the government account for about three-quarters of all fixed investments in Russia. The pace of growth in these investments has varied considerably across sectors. In the first half of this year, investments in natural gas production and liquefaction roughly doubled in their real volume, while investments in telecommunications were up by one half. These leaps provided a large boost to growth figures for total fixed investments. On the other hand, investments in crude oil production continued to fall as they had in 2018. Investments in oil refining were up notably after last year’s drop. Investments in other manufacturing branches declined after two years of strong growth.

First-half growth remained brisk for fixed investments by entities other than large & medium-sized firms and the government, scoring a pace of 5−6 % y-o-y even after rapid growth in 2016−18. Most of these investments consist of housing and machinery & equipment in various sectors. The data on this category of other fixed investments are based, especially within a year, on Rosstat’s estimates of fixed investments by small firms, entrepreneurs, households and the grey economy.

Data on the rapid rise in the real volume of these other fixed investments carry a special feature as regards price increases. Comparison of the volume data to data on the value of these other fixed investments indicates that the rise of prices in these investments for many years has considerably lagged the price increases in fixed investments by large & medium-sized firms and the government, or even declined, like they did last year. It appears that in some years a partial cause of the slower price increases was a moderate rise in housing construction prices.