Experts tell about the disincentives to invest in the domestic economy

2 october 2015

Experts of the Analytical Center studied the dynamics of investment activity in the conditions of economic recession in Russia. According to them, at the moment there are no incentives to invest neither from large corporations nor from large government projects or small and medium-sized businesses pertaining to additional investments. The specialists point out that the study does not cover all the problems of capital investments in the economic downturn conditions, it addresses only the basic parameters of the process and the degree of sophistication is determined by the statistics.

According to the experts, the rate of capital accumulation in the developed countries is at the level of 20-21% of GDP, which is lower than in developing countries, where the index reaches 24% (excluding China that has more than 45%). The low savings rate partly reflects the saturation of the elements of physical infrastructure (including housing), so that the developing countries are becoming an attractive target of investment and the low savings rate in some of them - a sign of poor investment climate. In Russia, despite the recovery of activity in many sectors of the economy after the crisis of 2008-2009, the growth of investments slowed down: in real terms in 2001-2008, they grew on average by 13% per year, and in 2009-2014 - by only 1 %.

The experts believe that the significant fall in the absolute and relative volumes of investments in machinery and equipment threatens the future economic growth.

Also serious changes are noticeable in the investment flows distribution structure. In 2014, investments increased in mining, but investments in manufacturing activities fell down which, according to analysts, can negatively affect the process of import substitution. If you look at the situation in the regional context, the worst performance of investment activity in the 1st quarter of 2015 is observed in moderately developed regions.

The bulletin notes that the current economic downturn is very different from the crisis of 2008-2009. Now the gross investment are declining at a moderate pace (in the 1st half of 2015 investments turned out to be 5% lower than at the same period in 2013), and in 2008-2009 they fell sharply and strongly.

The Experts believe that the decline in investment holding back demand and employment in the sectors of mechanical engineering, building materials and construction, and also reduces demand for loans. Thus, the decline in investment demand spreads further in the economy.

Detailed information – in bulletin “The dynamics of investment activity in the conditions of the downturn of the Russian economy”.

Other editions of bulletins on the socio-economic crisis in Russia can be found in the section Publications.