BOFIT Viikkokatsaus / BOFIT Weekly Review 2021/09

Following a decline last spring, fixed investment was down by about 5 % y-o-y in real terms in both the second and third quarters. It recovered in the fourth quarter, rising by over 1 % y‑o‑y. As fixed investment recovered and last year’s second-quarter drop was more modest upon revision, the overall dip last year amounted to only about one-and-a-half percent. This is a significantly smaller fall than shown in the fixed capital formation number of -6 % as included in GDP accounting. The difference is due to statistical differences in calculation of the two indicators (e.g. coverage of datasets).

Fixed investment of large and mid-sized firms and the government sector fell by just 1 % last year. Government sector investment rose significantly as part of measures to counter the economic recession. Rosstat estimates that other fixed investment (i.e. small firms, households and grey economy) contracted last year by just over 2 %.

At this stage, Rosstat’s annual data on the structure of fixed investment only covers the large and mid-sized firms and the government sector. These together account for about three-quarters of total fixed investment. The overall number for their decline was significantly affected by the reduction in investment in pipeline transmission of the oil & gas industry, which was down by a third last year after already having fallen sharply in 2019. On the other hand, investment in production of oil & gas increased by 2 %, having already experienced strong growth in 2019. Investment in oil-&-gas-production-related services continued to decline. Investment in oil refining, which took off fast in 2019, rose at a 14 % y-o-y pace last year.

Investment in manufacturing (excluding petroleum products) fell another 2 % y-o-y after a drop in 2019. The biggest declines in fixed investment were seen in the metal products branch, as well as the machinery, equipment & vehicles branches. Fixed investment in metal manufacturing and pharmaceuticals rose strongly.

The impulse into the economy last year from increased government sector spending was also reflected in a rapid rise of investment in the healthcare field and public administration. These spending efforts essentially lowered the overall contraction in fixed investment. Investment from government sector budgets rose to about 15 % of total fixed investment.

The structure of fixed investment in Russia has evolved over recent years


Sources: Rosstat and BOFIT.

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