Production in Russia was plummeting. Advanced components from the West are lacking

Russia’s invasion of Ukraine and the sanctions imposed by the West cause a decline in industrial production in Russia, PIE experts noted. “In September 2022, the production index was 3.1 percent. lower than a year ago, which means the largest decrease in two years“- they indicated. They added that the deterioration particularly affected sectors subject to sanctions and Russian export restrictions.”

According to PIE, the decline in Russian production is partly due to the high performance in September 2021, which is a benchmark. “However, the data show a decline in manufacturing, lower oil and gas production, and a deterioration in the mining sector as a whole“- they noted. For example, the extraction of metal ores fell by 6.5 percent. Referring to the main reasons for the decline in industrial production, they pointed to worse results of industrial processing, whose sold production decreased by 4 percent y-o-y.” “Restricted wood processing fell by 19.8%. rdr “.

According to PIE analysts, a serious problem for the Russian economy is the stoppage of the import of technologically advanced components as a result of the sanctions.. “As a result, in sectors dependent on importing parts from abroad, production drops the most – for example, the production of means of transport by 51.8 percent y / y” – stated in the last issue of “Tygodnik Gospodarczy PIE”.

In individual product categories, the biggest drop, analysts added, was related to passenger cars, which were produced by 77.4 percent. less than last year, washing machines (-57.9%) or refrigerators (-42.4%). “Running out of spare parts stocks and problems with their import it is also the cause of a deep, 20 percent. decline in production sold in the department of machinery and equipment repair “- experts explained. In their opinion production results will continue to deteriorate, incl. as a result of the entry into force of the EU embargo on a large part of Russian oil supplies and the continued depletion of stocks of components.

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According to PIE, the results of industrial production show that the sanctions imposed as a result of Moscow launching a full-scale invasion a serious economic crisis in Russia. “Although the effects of the sanctions appear to be smaller than expected, the depth of the recession is greater than the crisis in Russia in 2015, when GDP fell by 2%.” – marked. In This year, the International Monetary Fund forecasts a decline by 3.4%, and next – by 2.3%.

As experts explained, unlike previous economic crises, which were mainly caused by the collapse in oil prices, the current recession in Russia is accompanied by record high commodity prices, which are the source of key budget revenues. “Moreover, the sanctions affect investments that will determine the future economic situation (eg new investments in the energy sector) and cut Russia off permanently from Western technologies” – emphasized. As a result, a quick recovery of the Russian economy is unlikely, assessed PIE experts.

Due to the sanctions, Russian imports have dropped significantly, and Moscow is struggling to find alternative sources of the missing goods. “Although the Russian Customs Service no longer discloses foreign trade statistics, the information from Russia’s trading partners shows from which directions the Kremlin is trying to obtain deficit products after the imposition of sanctions,” PIE said. The data show mainly the successive recovery of imports from China, which collapsed after the start of the invasion, and a huge, two-fold increase in imports from Turkey, “which has become a gateway for Russia to bypass sanctions” – concluded.

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