Rising rank: Russia has broken the Western “giant” out of the top ten countries

/Pogled.info/ The increase in industrial production in Russia continues

In the list of industrialized economies, Britain fell from eighth to 12th place and lost its place in the top 10 to Russia. Why?

Relegation from the top ten

According to a study by the British manufacturing association Made in the UK, Russia and Mexico are in the lead. As specified by the Times, these countries were ranked eighth and seventh respectively. China and the US held the lead.

Experts attribute London’s failure to the “reshaping of the contours” of the global economy and the lack of a “long-term business strategy” unlike other major countries such as Germany, China and the US.

Britain is the only one of the most industrialized countries in the world that does not have a plan for its manufacturing sectors, analysts say.

And there is no basis for a positive forecast, including “advanced” manufacturing industries, say the experts from the University of Sheffield.

“Manufacturing job losses have been reversed over the past five years, but this may be only a short-term rebound from the previous decade’s devastating recession, exacerbated by the 2008 economic crisis “Moreover, we seem to be witnessing a new phenomenon: Britain is creating low-skilled jobs without increasing production capacity,” the study’s authors wrote.

Political errors

According to university analysts, leaving the EU will continue to put pressure on the country’s real sector in the years to come. There may be trade barriers with major European partners and a reduction in investment.

“The exclusion from the ranking is due, on the one hand, to the growth of the industry of competing countries, on the other hand, to the problems of our own industry. Among them is the severing of economic ties with Russia, especially the refusal of oil and natural gas cannot have an effect,” says Leonid Khazanov, an independent business expert.

Double the speed

Russia has shown positive dynamics since March 2023.

Activity in the real sector has grown to its highest levels since 2017. And the rate of employment growth is the highest since 2000.

The main contribution is made by the processing industry – plus 7.5 percent. The total for 2023 is 3.5 percent.

In the first half of 2024, according to Rosstat, the industry added another 4.4 percent (in 2023 it was 2.1).

Analysts at Made in the UK attributed the rise to “unprecedented growth in the defense industry, which accounts for more than six per cent of the country’s GDP”.

However, in addition to government provision for protection, import substitution and localization of production played an important role.

Not just the military-industrial complex

The leaders are mostly medium-sized and high-tech enterprises. In particular, the production of computers, electronic and optical products. The interruption of foreign supply stimulated the modernization of the product and technology base and ensured that maximum capacity was utilised. Places planned for local products have opened.

In April, the Center for Marketing Research at the National Research University of the Economy published the results of a study on the progress of import substitution in the industry. It turned out that in 2023, compared to 2022, the process accelerated in 36 percent of enterprises.

In 2024, manufacturing officials expect, this will continue for 47 percent of electrical equipment companies, 44 percent of motor vehicles and trailers, 40 percent of other finished goods. In the pharmaceutical sector there are 47% of these enterprises, the petrochemical industry – 42, the figure for the mining industry as a whole is 42%, in the oil and gas industry – 30.

As indicated by the Institute of Higher Education, judging by the estimates of demand for import substitution, enterprises “are heavily involved in the process”. Almost 30% noted a low dependence on imports.

“A new level of recovery’

In the first half of the year, the manufacturing industry also did a lot: more than eight percent. The leaders in terms of growth are the production of finished metal products (excluding machinery and equipment, 36.1 percent), the production of computers, electronic and optical products (35), cars, trailers and semi-trailers (27.4 percent) .

A special article is passenger cars. If in 2022, against the background of the departure of Western brands, there was a 2.5-fold decline, then in 2023 there was an increase of almost 20 percent. And now it is 62.2.

There are also records in the field of radar equipment and remote control equipment – 65.7 percent, navigation instruments – 45.2 percent. Assembly of diesel locomotives – 45.7, highway freight cars – 40.4 percent. And there is even beet sugar at 41.7.

As experts from the Center for Macroeconomic Analysis and Short-Term Forecasts said, since February the country has been experiencing “a new level of recovery.” They attributed about two-thirds of the increase to market factors – the immediate termination of large orders in the field of metal products and the recovery of the production of petroleum products.

For example, March had its best performance in almost 18 years. The S&P global PMI reached 55.7, the highest level since August 2006. More than 50 means growth, less means recession.

Capacity utilization

Factory utilization rose to 80.9% in the second quarter, the Bank of Russia said. The data is based on regular surveys (since 2000) in the non-financial sector. The sample includes 14.5 thousand enterprises.

“This is a new historical level,” the Central Bank emphasizes. In the first quarter, it was 80.3.

More specifically, in the mining industry – 82.6 percent, in the manufacturing sector – 75.6, in construction – 77.7 percent.

The Bank of Russia says that initiatives have “renewed production amid a reorientation towards domestic demand and the strengthening of import substitution programs. “

All this was accompanied by increased investment activity. According to estimates, this is the highest level since 2009, according to the regulator. Now the balance of the answers is about nine points; two years ago it was in the negative zone, at minus four, and in covid 2020 it was less than eight.

Out of bounds

Western analysts admit: the Russian economy is growing, and this has been far beyond the scope of “defense” progress.

The country thus received higher than expected oil and gas revenues: sanctions on fuel prices largely failed. Last year, the federal budget was filled with 8.82 trillion rubles from this sector – 822 billion less was expected.

As a result of Western sanctions, companies are investing heavily in renewing production lines.

In the first quarter, according to Rosstat, investment in fixed assets increased by 14.5% year on year to 5.93 trillion rubles ($66.2 billion).

Translation: V. Sergeev