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Credit, Wages Squeeze out Profit
Rosstat published data yesterday that suggests that the growth of profit for Russian business slowed in the third quarter of the year. In the report of the federal statistical service, the data were summarized as “Between January and September 2007, the balanced financial performance (BFP – profit minus loss) of organizations (without small business, banks, insurers and budget organizations) was 3479.9 billion rubles, or $135 billion. 65,700 organizations received profit of 3796.3 billion rubles, 24,000 had losses totaling 316.4 billion rubles.” By comparison with the same period of last year, the growth rate of BFP was 30.1 percent. At the beginning of 2006, that indicator was about 35 percent.
Little attention has been paid to the BFP until recently. The growth of the monthly profit of the nonfinancial sector of the economy has approximately corresponded to the nominal GDP. But in September of this year, the BFP dropped somewhat lower than a year previously, which, when changes in the price scale and the growth of the economy were considered, meant that it had dropped considerably. The GDP had grown by about 7.5 percent in the same time in real terms and, while estimates of the GDP deflator had not been published, it was known that producer prices had risen 17 percent since the beginning of the year. Thus, in real terms, the profit of nonfinancial enterprises could be a quarter lower than a year ago.
There is clearly not enough data for unambiguous conclusions. The Rosstat information so far is evidence of the continuation of a tendency recorded since 2005. The GDP is changing structure rather quickly. The share of gross profit in the GDP is shrinking and the share of wages is growing. (The latest data available are from the second quarter of this year.) In addition, the share of taxes in the GDP is substantially higher than, for example, in 2003. In other words, a shortage in the qualified workforce is forcing businesses to share a large portion of their profits with their workers and sources of income are becoming to a larger degree credits rather than profits.
www.kommersant.com
All the Article in Russian as of Nov. 27, 2007
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