Investments into the Russian economy: dynamics of the recent years and prospects
In recent years in Russia there is an adverse economic situation which reflects adversely on the investment climate of the country. Since 2014, investments into the fixed capital decreased in the Russian Federation. Moreover, rates of this decrease increased from 1,5% in 2014 to 8,4% in 2015. As a result in 2015 the total amount of investments into the fixed capital in nominal terms amounted to14 trillion rub.
Dynamics of direct foreign investments (DFI) amount is also unfavorable: according to UNCTAD, in 2014 this parameter in Russia has decreased by 70% from 69 to 21 billion dollars, at the same time it was the first time when a net outflow of PII from the Russian Federation was marked. In 2015 the situation has considerably worsened: while total amount of PII in the world has reached the record parameter, having increased by 36%, the decrease in Russia amounted to 92% to the minimum level for the last 15 years.
In a separate development the entrepreneurial confidence index decreases which reflects the economic situation in the current quarter and expected changes in the following one. Thus, if last year it was equal to -1%, then in the 1 quarter of 2016 it reached the lowest parameter of -14%.
The negative dynamics is conditioned by several reasons and events influencing the investment climate of Russia and Russian and foreign investors sentiments. On the one hand, they are external shocks (sanctions imposing concerning Russia, especially in financial sphere, and decrease of prices for the main products exported from Russia), on the other hand – serious structural problems of the Russian economy which had the key influence on the economic growth potential since 2000s. As a result in recent years in the country availability of the state and credit financing and volumes of own funds decreased that led to the decrease of investment activity.
Western companies (Volkswagen, PepsiCo) began to decrease their shares on the Russian market due to the decreased projects profitability and increased risks. However, gradually investors from other countries take their places – China, India, Middle Asia countries – looking for new opportunities for their profitability increase. The interest to Russia strengthened after the depreciation of ruble, especially from the countries of the Persian Gulf. For example, UAE cooperate with Russian Direct Investments Fund (RDIF) since 2013 and during this time made capital investments for 5 billion dollars, 2 billion dollars of which were directed to infrastructure. Kuwait plans to invest the same amount into the Russian projects.
In January 2016 one of the largest world port operators DP World (UAE) and RDIF signed the agreement about the partnership according to which the business created together will serve the Russian ports and specify in the logistic operations. Such a transaction is important for Russia not only from the point of view of investments attraction totaling 2 billion dollars but also for the Emirati company inspection which will allow to improve significantly the state of port infrastructure and quality of supplied logistic services.
Despite the increased interest of the Eastern partners to Russia and efforts of Russia on investment climate improvement, further investments volume decrease is expected. Thus, the Ministry of Economic Development of RF forecasts the decrease of this parameter by 3-3,5% in 2016. According to the experts it is impossible to reach the high level of investment activity without the Russian economy problems solution: it is necessary to decrease dependence of prices for energy resources due to the development of alternate sources of energy, increase the role of the regions in the state governing, and also change the GDP structure towards the increase of services sector, which becomes the modern center of innovations development and investments attraction.