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Monday, April 16, 2018

The Finance Ministry hurried to declare about getting rid of the “Dutch disease”


Cheap oil helps the Russian economy to get rid of “Dutch disease”, “breathing those industries that are in a period of high prices were at a standstill,” said Anton Siluanov. The number of industries is really growing, and in General industry for the first time in recent years has shown growth. However correct the estimates of the Ministry of Finance?

The Minister of Finance saw the deliverance of the Russian economy from “Dutch disease”. Thanks to falling prices for oil grow those industries, which in the period of high prices were at a standstill, said Anton Siluanov during the Congress of the Russian Union of Industrialists and entrepreneurs (RSPP).

“Compared with a number of other oil and gas producers, whose dependence on the oil and gas sector reaches 90%, it is sufficiently diversified”

“The profit of economic entities increased by 53%. Breathing those industries that are in a period of high prices were stagnant. Our economy is freed from the Dutch situation. We expect this profit will be directed not to the payment of dividends, and for investments”, – said Siluanov, quoted by “Газета.Ru”.

It is premature to talk about the rise of non-oil sector of the economy in Russia? Probably the optimism of the Minister of Finance based on the recent data of industrial production, which last year declined, but in February of 2016 showed an annual growth of 1%.

Among the sectors, which is not bad due to low oil prices – agriculture. Last month it increased by 3.1% compared with February of 2015, especially feel good producers of meat and poultry. Moreover, even the volume of cargo rose in February by 3.8% and in construction it is noticed an increase of 0.4%. These areas showed a positive trend and compared with January, adjusted for seasonal and calendar factor. Last year, all these sectors except agriculture were in the negative zone.

Growing industries include the chemical industry (growth 2.7%), food (2.3%), textiles (3,7%), leather and footwear (6% and 2%). “Due to the restrictions issued by the state for the purchase of medical equipment, our manufacturers have increased their production by 37.9%, while an equally sharp increase in quality is not observed,” – said the General Director of the analytical community ThetaTrading Dmitry Aderman.

Engineering is not so clear. The automotive industry is still in a stupor, while in industries where there are large gosclient, the situation is not so critical. For example, in the production of formulations where the client are the Railways, or in the production of machinery, where the main customer for the MOE, there has been a double-digit growth, said the Deputy Director of analytical Department of “Alpari” Natalia Milchakova. Growing and production of agricultural machinery.

But the main reason for the growth in these industries is still not in getting rid of the so-called Dutch disease, and the devaluation of the ruble, the Russian predamage, the development of import substitution and the rise in price of imported goods.

“It is significant that the highest growth rates in those segments of food market, which protected the Russian embargo. And in the field of production of beverages, for example, there is still a decline, largely due to the fact that imported alcohol under the Russian embargo has not got, and, accordingly, competition in this segment of the food market prevent our manufacturers to use the advantages of a weak ruble,” says Milchakova.

In addition, a number of consumer industries is growing from a low base. “Shoe and textile industry for many years suffered from competition with imports, and the demand for foreign goods fell, domestic producers an incentive to grow, thus ensuring the quality level is no worse than China or the former USSR”, – the expert adds “Alpari”.

However, the February growth of the industry actually does not give grounds to speak about the rise of non-oil exports in the country. It’s even about the growth of Russian GDP for the whole year not talking. The Bank of Russia the growth of the economy waiting for the end of the year or early next.

“February’s growth the industry has shown through the growth of mining, while manufacturing production in February, the index of industrial production was negative – minus 1%, in electricity production is zero. Against this background, certainly, early to speak about the effectiveness of diversification processes in economy of the country”, – said the first Vice-President of the Russian Union of engineers Ivan Andrievsky.

Binding Siluanov growth sectors of the economy to the volume of total profits is also not quite correct. “As for profit business entities, private organizations, this measure could actually increase, but hardly in respect of industrial growth, which is not yet, or in connection with the growth in physical volumes of sales. The increase in profits could be a consequence of inflationary phenomena”, – said Andrievsky.

According to statistics, the revenues of the profit tax in January – November of 2015 increased by 12.8%, but hardly the only reason for this was the increase in profit. This could including enhancing the efficiency of tax services, the expert does not exclude.

Net profit spent on dividends may depend not only on performance, but also on other factors, or can be “paper”. In addition, the recovery from a “Dutch disease” of profit is not directly dependent on, says Milchakova.

Statistics inexorable: the energy resources remain the key export commodity of Russia. Thus, according to the Federal customs service, in January the share of fuel and energy complex products in exports in value terms exceeded 66%. As to the decline in the share of oil and gas revenues in the Russian budget, this is most likely due to falling commodity prices than the growth of non-oil sector, said Andrievsky.

However, you cannot ignore the fact that the share of metals and chemical products in Russia’s export structure is growing. And in order to export agricultural products to developing countries, in Russia everything is there.

Milchakova believes that, compared with several other oil and gas producers, whose dependence on the oil and gas sector reaches 90%, it is sufficiently diversified. But in General, Russia is in the middle of a complicated way of further getting rid of oil dependency. As soon as the share of commodity exports will be reduced to 35-40%, we can talk about overcoming the “Dutch disease,” says Andrievskiy.

“The ratio should be at least 50 to 50, – more lenient Milchakova. But if the structure of exports will increase the share of non-oil revenue, there’s nothing wrong”. To get rid of the oil “needle” you, but more importantly, she said, not get hooked on another “needle” and not to fall into dependence from adverse price fluctuations on other commodities. For example, if a country relies entirely on exports of metals or metal product, it is also bound to rise or fall in world prices for this commodity.

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