February 21st, 2013

Russian Industrial Output Contracted by 0.8% in January

The Siberian oil fields already passed their production peak

According to Rosstat, the governmental statics agency, industrial output in January shrank by 0.8% year over year. Adjusted for seasonality and calendar effects, the output fell by 1.5% comparing with December.

Rosstat reported negative figures for industrial production for the first time since November 2009. Though many analysts explain the figure by combination of several one-time events, the slump in year over year growth rate continues the trend of 2012. Over the past year the pace of industrial expansion slowed down each month. The oil output, crucial for the stability of the Federal budget, dipped in January by 1.7%.

The Russia’s GDP most likely will continue to grow thanks to the expansion of the public sector and growth in the service sector. However, the country’s oil industry won’t be able to contribute to the economic growth anymore, dragging down the economy in the midterm. Hence the entrepreneurial activity is suppressed by the state, there is little room for any new business development in Russia. Any economic growth in such circumstances will be weak and fragile. Alas, Medvedev’s government has no power, no public support to improve the country’s poor investment climate.

Bloomberg

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