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Industrial production grew by 3.5% last year, Rosstat reported. During the year, the dynamics was heterogeneous: in the first quarter there was a drop of 1.4%, in April – June, industrial growth reached a peak of 5.7%, in the III and IV quarters it increased by 5.4%  and 4.1%, respectively, according to the department. The driver was manufacturing, which grew by 7.5%. Mining decreased by 1.3%.

In 2022, industrial production increased by 0.7% due to faster growth in the first quarter (by 6.3%). In the II–III quarters, there was a decrease in indicators against the background of the departure of foreign manufacturers from Russia.

According to the Ministry of Energy, the increase compared to the level of two years ago was 4.1%. Industries focused on domestic demand grew at a higher rate: by the end of 2023, they showed an increase of 9.2% year-on-year, the Ministry of Energy notes. At the same time, export–oriented industries also showed positive rates - an increase in output by 3.2% in annual terms.

The growth of industrial production in 2023 was one of the highest results in the last decade, with the exception of post-crisis recovery growth in 2021, commented Lev Denisov, Director of the Department of Macroeconomic Analysis and Forecasting of the Ministry of Economic Development. These figures confirm not only the successful completion of the adaptation of enterprises to the prevailing foreign economic conditions, but also the availability of resources for further development, he believes. 

In 2024, according to the Ministry's current estimate, growth will be at the level of 2.6%. 

The 10 products with the highest volume growth

Name of the products	2023 Volume of production	%  as compared with 2022
Navigation, meteorological, and geophysical instruments in billions of rubles	113	175,2
Bakery machinery in billions of rubles	3,5	170,2
Buses with a mass of no more than 5 tons except buses with an electric motor, thousand units	23	167,9
Radar radio navigation equipment, with remote control in billions of rubles	276	132,3
Cables fiber optical in mil km	2,9	130,9
Computers, their parts and accessories in billions of rubles	113	127,3
Ball or roller bearings in millions of pieces.	61,6	127
Freight wagons of broad gauge, thousand units	63,6	126,6
Working garments in billions of rubles	51,9	124, 3
Centrifugal pumps for the supply of liquids, other, thousand units	995	124,1

Source:  Rosstat

 

Transport and equipment

The leader in terms of growth was the production of finished metal products, except machinery and equipment (by 27.8%), as well as the production of other vehicles and equipment (by 25.5%).

According to Rosstat, among the most important types of products, the production of navigation devices grew rapidly (by 75%), equipment for the production of bakery products (by 70%), buses weighing up to 5 tons (by 67.9%). There were also high growth rates in the production of computers (by 27.3%), radio equipment (by 32.3%), batteries (by 21.9%), fiber cables (by 30.9%), bearings (by 27%).

Among the production of machinery, a drop was recorded in agricultural machinery – tractors (a decline of 11%), seeders (a decline of 13%). At the same time, the growth was high in freight vehicles (by 19.3%), mainline diesel locomotives (by 32.2%), freight wagons (by 26.6%). Car production increased by 19%, while internal combustion engines fell by 11%.

Car production increased against the background of an ultra-low base last year, when most of the foreign manufacturers localized in the Russian Federation left the market due to their own. The volume of engine assembly in the passenger car segment before the start of the Special Military Operation largely depended on the enterprises of foreign companies in Russia – Volkswagen, Hyundai - Kia, PSMA( joint venture of Peugeot-Citroen, Mitsubishi in Kaluga), says Sergey Burgazliev, an independent automotive consultant. Due to the departure of automobile brands, the models of which were assembled at these plants, the volume of engine assembly, accordingly, decreased. At the same time, in 2023 several Chinese automakers (Kaiyi, BAIC, SWM) came to Russia with the assembly, the analyst continues. But since they are still assembling cars using the large-node method, the total volume of engine production in the country has decreased, he explains.

Food industry and clothing

Food industry production increased by 5.9%, beverages – by 1.4%. Among the products, the production of juices (by 20.4%), baby food (by 21.7%), cheeses (by 16.2%), mineral water (by 16.4%), dietary supplements (by 15.1%) increased. The decline was observed in the production of bakery products (by 1.5%), milk (by 1.3%), butter (by 1%). Cigarette production also decreased (by 10.7%).

The production of clothing increased by 4.1%, shoes – by 11.9%, leather and leather products – by 12.3%, finished fabrics – by 12.3%, bags, suitcases and backpacks – by 23.5%. There was a significant increase in the production of working wear – by 24.3%.

High growth rates are recorded in the production of furniture (by 20.7%), chipboard (by 11.3%). At the same time, the production of timber (by 4.5%) and plywood (by 1.1%) decreased.

Mining, electricity and water

Gas production decreased by 7.5%, LNG ) Liquefied natural gas) by 2.4%. At the same time, coal production increased by 1.1%. Output in the field of electricity and gas supply remained at the level of last year (an increase of 0.02%), in the field of water supply and waste disposal there was a decline of 2.5%.

The indicators of the extractive industries of the Russian economy are influenced by anti-Russian sanctions imposed in 2022-2023 by unfriendly countries due to their actions in Ukraine. The most significant sanctions were imposed against the oil and gas sector. In particular, the EU, the USA and a number of other countries have banned the sea import of oil and petroleum products from Russia and their transportation at a price above the established limits.

Gas production in the country decreased as a result of a drop in gas exports to EU countries. The European Union did not impose a ban on Russian gas supplies, but they decreased sharply as a result of the shutdown of pumping through the Nord Stream pipeline due to a malfunction of Siemens gas pumping equipment and a reduction in fuel transit through Ukraine, later the Nord Stream was damaged as a result of sabotage. Russian Deputy Prime Minister Alexander Novak reported on January 25 that oil production in Russia last year decreased by 1% to 530 million tons, gas production decreased by 5.5% to 636.7 billion cubic meters.

Sanctions were also imposed on the supply of coal, steel products, diamonds and gold from Russia.

High demand

The manufacturing industry has made a decisive contribution to the acceleration of industrial production, says Alexander Isakov, chief economist at Bloomberg Economics. According to him, the contribution of processing acceleration was about 3.5 percentage points. At the same time, a decrease in production, primarily of oil and natural gas, by 1.3% in 2023 against an increase of 1.5% in 2022 subtracted 1.3 percentage points from the growth. Thus, the main factors of industrial production in 2023 are The parameters of Russia's participation in the OPEC+ deal to limit oil production and exports and the growth of the manufacturing industry against the background of the resumption of production of passenger cars, the growth of industries related to the military-industrial complex, he said.

Last year was not easy and comparing it with 2022, which was also very heterogeneous, obscures the nuances, says Vladimir Salnikov, head of the real sector of the CMACPa. The fastest growth was associated with the growth of production of the military-industrial complex (MIC), but this was not the only driver, he believes. If in 2022 he set the tone and 2/3 of production was associated with him, then in 2023 his influence was less. "Last year we had a recovery in the affected sectors. For example, in the automotive industry, it showed growth, but this is a low base in 2022," says Salnikov.

Up to half of the growth in the manufacturing industry is accounted for by three industries with the closest ties to the military-industrial complex: the production of finished metal products, transport, as well as optics and electronics, Isakov points out. At the same time, the weight of these industries in added value is only about 15%. The second half of the growth is accounted for by civilian industries – primarily the restoration of passenger car production, he notes.

Another factor in the growth of industrial production is an increase in demand caused by an increase in payments to military personnel and a general increase in salaries due to shortages of personnel, notes Salnikov. Hence, for example, the growth in the food industry, the expert says.

The growth of industrial production can be attributed to the course towards import substitution, says Evgenia Trautman, senior analyst at the ACRA group of sovereign and regional ratings. According to her, the confirmation of success was the increase in production against the background of a decrease in exports.

There has been no full-fledged import substitution in a year and a half, Salnikov notes. It is always an investment that takes time, starting from making a decision and ending with reaching production capacity. "There was a point import substitution, and it is not related to new projects, but to the acceleration of old ones that have already been implemented," he believes. Basically, Russia has returned to the pre-crisis situation with the reorientation of imports from unfriendly countries to parallel imports and China.

It can be said that Russian business has been able to occupy the niches of departed manufacturers in a number of industries, says Anton Tabakh, chief economist at the Expert RA rating agency. This process is in full swing in the automotive industry, but not yet in the machine tool industry. But in the food industry, a confident "yes".

This year there will be a new situation – there is no need to wait for active growth, because the same defense industry has reached 100% utilization, Salnikov notes. Rigid PREP will also limit production. The expected rate will not exceed 1.5–2%, this is the upper limit, the expert believes.

Source: https://www.vedomosti.ru/economics/articles/2024/02/01/1017832-pochemu-promishlennoe-proizvodstvo-viroslo?utm_campaign=newspaper_1_2_2024&utm_medium=email&utm_source=vedomosti