Oil Production Not Out Of Its Slump

Between January and May, industrial production in Russia rose by 6.9 percent. In May, it was 6.7 percent, after 9.2 percent in April. Oil showed some signs of coming out of its recession in April, but fell again in May by 1 percent. Sergey Ulatov of the World Bank says there is no stimulus to increase oil production when the prices are high. “The maximum tax rate in the sector is high, and additional production would only increase it,” he observed. The main industrial growth was in heavy industry and construction. Economists attribute the growth to high investment demand in the state and private sectors.

According to Rosstat, the state statistics service, extractive industries grew 0.1 percent in May (0.4 percent in April), while manufacturing grew by 10 percent in May and 14.5 percent in April. Production and distribution of electricity, natural gas and water grew by 2 percent in May and 0.2 percent in April. Sectors linked to construction and heavy industry made the main contribution to industrial growth in April. Vladimir Salnikov of the Center for Macroeconomic Analysis and Short-Term Forecasting says growth in heavy industry was the result of market conditions and will not be steady. The center estimates growth in “Machines and equipment” at 23 percent in May. “That growth was due to the growth of turbine production by more than 13 times. That is piece production,” warns Salnikov.

The situation is similar with “Transportation.” May growth in various forms of transportation ranged from 17 to 20 percent. “Rosstat underestimated the increasing spread of assembly production. The output is increased formally by pieces, but the greater it is, the less the added value,” Salnikov said. He said industrial growth in May would be 5.3-5.7 percent if corrected for that.