Russia economy impact sectors part 2
February 13, 2008 – 3:25 amStrengthening of the Ruble
The rise in the strength of the ruble threatens to negatively influence the competitiveness of Russian products on the world market. On the other hand, since energy carriers represent the major factor in the structure of Russian exports, this effect is presently of little significance. Nevertheless, experts reckon with state intervention or adjustment since, on the other hand, imports are becoming cheaper and cheaper and, with the exception of food stuff, domestic products are seldom competitive.
Increase in Consumer Credits
According to report by the central bank, the banking sector is growing at faster rate than the Russian economy overall. In particular, private consumer credits are growing very strongly. After an increase of 51 per cent in 2002, compared with the previous year, the volume in 2003 doubled to 300 billion rubles (more than US$ 11 billion).
Imports Rising Steadily
Imports into Russia increased in 2003 by almost 24 per cent to US$ 7.5 billion. A growth of 19 per cent was forecasted for 2004. The high demand for customer and capital investment goods is satisfied to a large extent by imports. In the furniture sector, more than 50 per cent of products are imported. As a result of the widening of the EU and the resulting broadening of partnership agreements between Russia and the EU countries, Russia is now able to enjoy lower import duties, which average 4 per cent, compared to 9 per cent in the new countries prior to their entry into EU. In this respect, however, each individual group of goods must be examined.
Moscow’s Regional Significant
Moscow plays a special role in the Russian economy. Whereas the city’s population represents only about 7 per cent of the total Russian population, Moscow’s GNP has accounted for about 20 per cent of the country’s total over the past few years. Moscow’s also assumes a leading position as far as the population’s income is concerned. The average annual income per head of the population is US$ 8.900. The high income of the Muscovites is prompting rapid development of the trading sector. The total volume of retail sales in Russia in 2004 was around 25 per cent of the total goods turnover in Russia, which was approximately US$ 49.3 billion.
There is a rising presence of foreign concerns such as Metro, Auchan or IKEA in Moscow, and other large centre. At the same time, Russian traders are also widening theirs networks, and are starting to enter the dynamic regions.
Foreign Investment as a Sign of Stability
The flow of foreign investment into Russia grew by 36 per cent in 2004 to reach US$ 40.5 billion. In the same period, direct foreign investment increased by 39 per cent to reach US$ 9.4 billion. The construction industry enjoyed an enormous upsurge, profiting from the strong demand for residential and office buildings in major economic centre.
Investment in Housing
Home building has also enjoyed vigorous development. The federal agency for construction (Rosstroj) is forecasting an increase in construction volume of at least 10 per cent in 2005. This makes the construction industry one of the leading industrial sectors in the Russian economy. In 2004, 41 million square meters of home space was built. A further 1.5 billion square meters are required to satisfy the needs of the Russian population. To achieve this figure, 150 million square meters must be built annually, which is unrealistic.
Russian government representatives hope that home building will be doubled by 2010 to reach 70 million square meters. According to Rosstroj, the total space taken up by dwellings in Russia is currently 2.85 billion square meters. The agency’s market research indicates that 60 per cent of families would to see an improvement in their housing situation.
