Russian industry plunged into depression

In April, Russian industry fully felt the “cold breath” of the viral crisis and the consequences of the authorities ’struggle against it – demand collapsed on a scale comparable to the 2008 crisis, a survey of industrial enterprises conducted by the Institute of Economic Policy named. Gaidar. If in 2008 companies recorded a decrease in demand since September and in a few months it reached a peak of 60 points (in the absence of a sharp increase or decrease in demand, the indicator is zero), in 2020 only in April the index dropped to 45 points. The expected decline in demand may exceed its decline in the 2008–2009 crisis, warns Sergei Tsukhlo, head of the Gaidar Institute’s market research laboratory.

Next, industrial production will begin to fall, a survey showed. The surveyed enterprises are already recording a drop in production – their output estimate for April fell by 50 points. In the 2008 crisis, the indicator fell to 60 points in just three months. According to the Federal State Statistics Service, in March Russian industry escaped a recession – industrial production grew by 0.3% on an annualized basis, but the industry was supported by a rush of demand for essential goods and goods. For example, buckwheat production immediately increased by 41%, and pharmaceutical products – by 64%. But the main drop will be in April – May, warned the director of the Center for Market Studies of the Higher School of Economics Georgy Ostapkovich.

So far, the enterprises themselves assess their financial situation as “good” and “satisfactory” (such estimates prevail over “bad” and “extremely bad”). But they expect it to deteriorate in the future – the expectations of entrepreneurs have never fallen so much. “Neither such a difference nor such a result has been recorded by polls,” admits Tsukhlo. With worsening expectations, the business began to postpone investments. The balance of investment intentions in April decreased by 40 points and already exceeded the worst point of the crisis of 2015-2016, when investment optimism was declining due to sanctions.

The number of companies reporting staff reductions has also increased record-breaking. Such an increase in the rate of change in the actual number of employees has also never been observed, notes Tsukhlo. In 2008, such a failure in evaluating entrepreneurs took half a year. True, the scale of layoffs is likely to decrease in May-June, although given the decline in demand and output, companies are unlikely to need so many employees. The shortage of personnel, which was recorded by the Institute’s polls, was replaced by their excess. Only 6% of enterprises reported a lack of personnel – this is the minimum since the 1998 default, a survey indicates.

Such negative results are not surprising, says Valery Mironov, deputy director of the Institute for the Development of the Higher School of Economics. The daily economic stress index calculated by the Development Center has long been at the level of 0.4-0.5, which indicates the pre-recession stage. “All crises began with such a significance,” warns Mironov.

But the labor market is not as catastrophic as the survey shows. His data speak of the intentions of enterprises, that is, they reflect the panic of the heads of enterprises, says Rostislav Kapelyushnikov, deputy director of the Center for Labor Studies of the Higher School of Economics. Such sentiments were also in the crisis of 2008-2009, and this is an encouraging sign, since there was no catastrophic increase in unemployment and a drop in employment then, he says. The Russian labor market is specific, employers do not like to lay off workers, preferring to reduce wages or shorten working hours, reminds Kapelyushnikov. There is hope that they will do the same in this crisis, he adds. In addition, the danger does not come from large enterprises, but from small and medium-sized enterprises, which can simply close, but how many of them will be impossible to predict now, all forecasts about it now are nothing more than fortunetelling on coffee grounds, he emphasizes.

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