Actuality, December, 10, 2007

Russian GDP (Gross Domestic Product) growth totaled 7,6% in the 3Q of 2007. These data, published by Rosstat (Federal State Statistics Service), turned out to be much better than prior estimations by MEDT (Ministry of Economic Development and Trade) and analysts’ predictions. According to them, the problems in the world markets influenced the Russian economy less, than it had been supposed earlier. However, it would be possible to keep growth (provided by a rise of manufacturing industries, trade and construction) at a reached level not so long. The growth outsiders remain raw branches, education and public health services.

According to the figures it turned out that in comparison with the relevant period of the last year real GDP has increased by 7,6% and nominal GDP has increased by 22,1%. This is quite higher than MEDT estimation. GDP growth was estimated at 6,7% earlier in July – September, 2007. GDP growth rate totaled 7,9 % in the 1Q of 2007. In the 2Q it totaled 7,8% and in the 2006 year it totaled 6,7%.

Actual excess of Rosstat estimation over MEDT prediction made up 0,9%. If in the 4Q of 2007 economic growth didn’t stop than all the analysts and MEDT predictions for the whole 2007 (7,3-7,4 %) would be exceeded. According to the year results, GDP growth rate can reach 7,7-7,8 %. In this case in 2008 GDP dynamics will be the best since post-crisis 2000. Then GDP has increased by 10%, and it was explained by the economy recovery after the crisis of 1998.

The analysts didn’t expect such high indices. “It is a surprise, but unambiguously a positive one”, declared Jaroslav Lisovolik from Deutsche Bank. “I would not expect economy recession in the end of the year, taking into consideration high October indices in investments and commercial production”. Really, according to Rosstat, in October, 2007 in comparison with the similar period of 2006 the investments increased by 19,6%, and commercial production increased by 6,1%. “These facts mean that the problems in the world markets have influenced the Russian economy less than it has been expected”, he marks.

The other banks analysts, interviewed by the Interfax agency, are surprised in a pleasant way too. Anton Struchenevsky from Troika Dialog predicts now GDP by 7,8% during 2007. His prediction was 7,5% two days before the Rosstat estimation publication. Tatyana Orlova from ING Russia told that the bank economists predictions still remain 7,7 %. Natalia Orlova from  Alfa-bank noted that the bank prediction is 7,4%, but “according to the new facts it is quite conservative”, now she waits GDP growth by 7,5-7,6% when the year will be up.

The analysts point out that industrial growth is the reason of the things happening. Natalia Orlova marks “acceleration growth of the gross value added in manufacturing branches”. In the 3Q of 2007 it was 7%, that’s closer to the top border of this index fluctuations range for the last four years (2,3-11,8%). However, the value added in trade and financial activity grew much quicker, that’s 11,4% and 11,6% accordingly. But really high growth rates are shown by construction. The value added has increased by 21,3% there. Let’s note, in September MEDT did not exclude a certain index growth delay in construction, but the autumn indices practically didn’t show the growth rates decrease in construction, in spite of sudden price rise on building materials.

Heterogeneity of industrial growth is emphasized not only by the leader branches dynamics. There are also outsiders. First of all, it is mining operations where it is only 0,8%. Besides, agriculture grows badly (0,9%). However, one can expect growth dynamics improvements because of the world and intra-Russian price conjuncture improvement even by the end of 2007. The branches, being an actual state monopoly, have really bad growth rates. They are education (1,1%) and public health services (1,9%).

Mining operations dynamics is easy to explain. Many oil deposits are almost exhausted. It is almost impossible to increase production there without significant investments. And taxation growth of raw branches imposed by the government in the beginning of 2000th years under the slogan “economy diversification” and “leaving the raw dependence” gives the results. Low dynamics of the branches corresponding to the same national projects can not arouse any questions. The state investments into education and especially in public health services were not so great comparing to the whole economy, but very huge comparing to themselves in 2006-2007 years. Jaroslav Lisovolik considers that unlike construction (where increased investments have caused an immediate growth acceleration of value added) one can hardly wait for changes in agriculture and social sphere without a good time period. “Some time should pass in order the effect from investments into national projects will be considerable”, the economist marks.

Education and public health services’ shares in Russian GDP are not big, only 2,3% and 2,6% accordingly yet. They have almost been the same for the last several years. However, there are no considerable changes in the GDP structure for the last years, unless agriculture share (it has a little bit decreased) and construction, manufacturing branches and financial branches’ shares have increased. It is obvious that such growth can not be eternal. It is also necessary to apply reforms of the most conservative economy branches for GDP growth continuation on the level reached in 2007. Still very often such economy branches are not considered to be conservative ones in Russia and sometimes the government is inclined to reform with a big, too evident, caution. Public health services and education are at the beginning of this list. So, these reforms remain in the agenda.