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Imports of Goods to Russia are Growing Faster than Exports
According to Central Bank data published at the end of last week on Russia's trade balance for June 2006, the speed of the growth of imports into Russia is steadily overtaking the speed of export growth. Against the backdrop of this growth in imports, the share of exports in machine-building and lumber and chemical production declined. The government takes a more pessimistic view of the situation than does the business community: the Ministry of Economic Development talks of losses in the competitiveness of Russian manufacturers, while investment bank analysts consider the situation to be temporary.
It first become noticeable in May 2006 that the speed of the growth of imports to Russia is outstripping growth in Russian exports. At that time, the speed of import growth exceeded export growth by only 0.8%, and experts dismissed it as a possible statistical error in the calculations. However, the data on Russia's trade balance released in June by the Central Bank confirmed the trend. The speed of import growth for the first half of this year was 33.9%, while export growth was only 30.6%. At the same time, the volume of imports was slowly but surely gaining on exports fueled by the high price of oil.
The Ministry of Trade and Economic Development (MTED) has long warned of a possible flip in trends in foreign trade, considering the possiblity to be a substantial risk facing the Russian economy. The MTED attributes the growth of imports to a strengthening of the real exchange rate of the ruble and a significant increase in consumer spending among Russians. Andrey Klepach, the head of the ministry's department of economic forecasts, has repeatedly warned that the net worth of trade could drop to zero by 2009, or even become negative. For the foreseeable future, the MTED predicts that the speed of the growth of Russian manufacturing will drop substantially behind the speed of import growth.
Meanwhile, the net positive worth of trade continues to grow: in June 2006 it grew by 26.9% to $11.822 billion, compared to $9.3 billion in 2005. However, in comparison with a record high in May, this constitutes a drop of $2.3 billion. It should be noted that export growth is supported exclusively by the raw materials sector of the economy. According to data from the Federal Customs Service, in the first half of this year crude energy products accounted for 71.1% of the volume of exports to non-neighboring countries (for the first half of 2005, this figure was 64.5%). By contrast, the share of exports of machinery and equipment dropped in June by 0.2%, to 3.0%. The same scenario is occuring in other processing sectors: the share of total exports represented by exports from industrial chemical production dropped by 0.8%, to 5.1%, while the export share of lumber products declined to 3.2%, versus 3.8% in the first half of 2005.
Investment bank experts, unlike the MTED, do not consider the situation to be too dramatic. According to Renaissance Capital economist Vladimir Pantyushin, "the tendency of import growth to surpass export growth is not decisive – exports will bounce back. Most importantly, the net worth of trade remains positive. In 2005, it was $120 billion, while in 2006 we can expect this figure to grew to $150-160 billion." A leading economist from Troika Dialog, Evgeny Gavrilenkov, notes that imports cannot grow without limits: "A zero net worth of trade by 2009 is hardly likely," he says. Both experts admit that the strengthening ruble will make it more difficult for Russian manufacturers to compete with imports. "However, this is a problem out of which some benefit can be derived," Mr. Pantyushin asserts. "Russian companies have undertaken a serious overhaul of their equipment." As such, machinery and equipment imports from non-neighboring countries consituted 49.5% of imports in the first half of 2006, as opposed to the 45.5% recorded in the same period of 2005. It is as yet impossible to say whether these investments will restore the balance of competitiveness on the Russian market. Their effect can be evaluated only in a year, at minimum.
Aleksey Shapovalov
All the Article in Russian as of Aug. 14, 2006
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