The improvement in the dynamics of capital investment is largely the result of lower prices for investment goods

Raiffeisenbank analysts discovered another (in addition to the low base of 2022) statistical reason for the rapid growth of real capital investments in the second and third quarters of 2023 (plus 12.6% and 13% in annual terms; see Kommersant on December 6). This improvement in the dynamics of the indicator is largely the result of lower prices for investment goods (see chart). “Growth could have been facilitated by a switch to cheaper imported analogues, as well as a shift in focus to investment objects with a smaller share of imports,” believes the bank’s chief economist Stanislav Murashov.

At the same time, Raiffeisenbank notes that the positive investment is apparently not sufficient to ensure a further increase in production, which has not been growing month-on-month for several months now in conditions of almost full capacity utilization. The release of investment goods in the third quarter, taking into account seasonality and the calendar, even decreased, according to the Center for Macroeconomic Analysis and Short-Term Forecasting. Raiffeisenbank believes that to restore industrial growth, “further intensification of investment is necessary, which is currently observed only in a number of large industries.”

According to the Central Bank’s monitoring of the opinions of enterprise representatives, investment growth will continue in the fourth quarter, but at a slower pace. In 2024, investment activity is expected to expand due to growing domestic demand, the development of import-substituting industries and logistics infrastructure to service growing trade flows with the countries of Asia and the Middle East, the regulator notes in its December review of the regional economy.

Meanwhile, increased investment may not occur in 2024. The growth of company profits (the main source of capital investment) has stabilized, bank loans, the share of which in investments has grown noticeably over the year, have become noticeably more expensive, and the requirements for borrowers have become more stringent. “Increased interest rates contribute to increased investment in money market instruments and bank deposits,” Central Bank analysts recorded a change in the preferences of enterprises in a recent report “What Trends Are Saying.”

Artem Chugunov