Russian companies increase proprietary investments in fixed assets

9 november 2018

Investments in fixed assets seem to be recovering in Russia, write the Analytical Center experts in their new bulletin on the current trends in the Russian economy "Trends and structure of investments in fixed assets". Last year, the gross capital formation increased by 4.4% while in the first six months of this year it was up by 3.2% on a year-on-year basis.

The authors of the bulletin are of the opinion that an important aspect in the adaptation of the investment process related to the change in the sources of financing for new investments: the share of equity in total investments in fixed assets is on the increase, and more and more investments are being seen in the processing industry.

The total increase in fixed assets is an important component of economic growth, the experts write. In the first six months of this year, the growth in fixed asset investments continued in all regions, except for those whose economies specialize in exports of raw materials, where investments fell on an annualized basis primarily on account of a very high base last year. The changes in the sources of financing in Russian regions follow the same patterns as similar trends at the national level: the first six months of 2018 saw a decrease in share of the borrowed funds both from budgets and bank credits. The main source of investments of medium sized and large companies relates to companies' equity (59.7%). Equity investments (for large and medium sized companies) increased by 7.1% in comparable prices of the same period of 2016.

The first six months of this year saw company profits grow at a faster pace (+33.0%) than losses (+24.6%), however, the share of loss generating companies increased, reaching 31.8% of the total number of the registered companies.

Speaking of borrowed funds, the experts note that the share of state funds in the sources of financing for investments on average is greater than that of bank loans, which is especially true in the financial and economic centers and in the less developed regions.

For more see the bulletin "Trends and structure of investments in fixed assets".

For the other bulletins on the current trends in the Russian economy, please see Publications.