Invest before it starts – Newspaper Kommersant No. 41 (7486) of 03/13/2023

The growth of investments by 4.6% in 2022, according to the published summary of Rosstat on annual capital investments, is provided mainly by industrial construction, paid for in comparable amounts by the state and private non-bank loans. Investments in the military-industrial complex in these statistics are very moderate, non-residential construction, chemistry, metallurgy and transport are the main objects of advanced investment last year, and geographically investment objects are more often located in the south of the Russian Federation, in the Urals and beyond the Urals, in investment statistics, the transfer of assets from foreign into Russian ownership. The task of the economy in recent months was, apparently, the ultra-fast completion of what investors definitely had to complete under any circumstances.

Rosstat’s summary “Investments in non-financial assets in 2022” is one of the highly anticipated documents of the statistical agency: only from it can one understand in detail how the large-scale investment decline that was predicted for almost the entire last year (which is natural in the context of the Russian military operation in Ukraine) gradually turned into turned into a moderate investment growth – at the end of the year by 4.6%. The basic assumption that the investment boom originates only in government spending, mainly in the military-industrial complex, needs serious clarification: the picture in the Rosstat tables is much more complicated and less obvious.

Recall that Rosstat calculates investments in non-financial assets only for large and medium-sized enterprises – much more inert in comparison with dynamic small businesses that respond faster to crisis moments, therefore, as a result, investments in the Russian economy, taking into account them, most likely stagnated or decreased, although, given that part of state investments, including those directly related to investments in military installations and logistics, are unlikely to be reflected in Rosstat reports, this needs to be verified. However, in terms of types of investment, the largest growth in 2022 is investment in non-residential buildings and structures: the share of investment in machinery and equipment (presumably due to sanctions) was declining, in housing it remained practically unchanged, and in computer and communication equipment even dropped significantly. At the same time, the answer to the question of who invested and from what funds is not trivial. Investments from bank loans in 2022 decreased (their share in the total fell by 1.3 p.p., to 9.7%), as did investments from own funds (a drop of 1.8 p.p., to 54, 2%).

There was an increase in state investments, but it clearly did not fully cover the decline in investing its own funds – this is an increase of 1.9 percentage points, up to 20.2% of all investments in 2022; local budgets almost did not contribute to the growth of state investments. On the other hand, “borrowed funds from other organizations” were introduced: they grew from 4.5% in the total to 5.4%, which ensured an increase in investments by about a third in general. As follows from another table of Rosstat – according to the forms of ownership of investors, state-owned companies contributed to the growth of state investments approximately on a par with the federal budget. Foreign investments decreased from 6.6% of the total to 3.9%, investments of joint ventures slightly decreased. Nevertheless, the statistical fact remains: the share of private Russian investments in fixed capital in the Russian economy in 2022 is the main one, and it has grown to 55.5% from last year’s 52.2%. Almost all investment growth can be explained by this growth in private investment, and, apparently, part of the effect, so far poorly visible, is the transfer of ownership from foreign to Russian owners, accompanied by private (non-bank) lending to buyers. In 2023, this trend should be more visible.

From an industry point of view, the growth point of 2022 is transport, mainly land and land, professional activities of all kinds, warehouses and logistics, construction and wholesale, there is also a strong increase in investments in chemicals and petrochemicals, less strong in metallurgy and oil and gas production. All other industries one way or another received less investment last year than in 2021, in general, the situation in processing is more than problematic – there the decline in investment was 6.7% per year, in the automotive industry they were more than halved. In sectors dominated by the state, there is investment growth, and it is, in fact, common – 0.5% year-on-year. In theory, “military investment” could be seen in the columns “production of other vehicles and equipment”, where Rosstat traditionally provides data on the military-industrial complex, but there growth is 2.3% year-on-year. In general, the “military investment boom”, if it exists, is mainly the costs of logistics and investments, which are not reflected in the statistical reports. In principle, the growth of investments in the military-industrial complex could be seen in the boom in investments in the Urals Federal District (10% against a decline of 0.2% in the Central Federal District) and growth below 5% everywhere, except for the Far Eastern Federal District (10.8%) and the Siberian Federal District (5.6 %). But in the Northwestern Federal District, which is rich in military-industrial complex enterprises, the decline in investment is 5%, while in the Volga region it is small – an increase of 3.5%.

So far, the Rosstat data shows a picture of almost rush industrial construction in 2022, both with public and private money. In the case of private investment, the main thing that has to be assumed for explanation is that the owners strove (and are striving now) to complete as quickly as possible those industrial complexes that were founded in the “pre-Covid” and “pre-war” times: the uncertainty is great, and it is better to finish everything faster, than in two or three years, which do not fit into the forecast horizon at all. The general schedule of Rosstat on investments, and approximately the same logic of budget spending in 2022, shows that if the trends continue, it makes no sense to talk about any real investment boom in the coming months, despite the numbers: most likely, there will be a slow reduction in investment , in statistical reports this will apparently be reflected as a decrease in investment growth rates in 2023 to 2-3% and in 2024 to 1-2% – approximately to the level of the “COVID” 2020. However, companies do not have financial problems with investments – rather, there is a problem with determining the general development prospects, without understanding which it is not easy to invest.

Dmitry Butrin