Industrial output marginally contracts in 2022 setting up a basis for moderate growth this year

RUSSIA ECONOMICS - In Brief 02 Feb 2023 by Alexander Kudrin

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Rosstat reported that industrial output contracted in 2022 by 0.6%. In December alone, it fell by 4.3% y-o-y, while it grew by 0.1% m-o-m in seasonally adjusted terms. Mining was up by 0.8%, and manufacturing contracted in 2022 (1.3%). The performance was uneven across sectors as the Russian economy is in radical structural transformation and time needed to accomplish it. Amid broken relations with the Western countries, some sectors oriented toward exports to the West suffered from restrictions, such as bans on imports from Russia (timber/woodworking or chemical industries are just two examples). Other sectors dependent on imports, such as car production, were also hit. The production of various vehicles was down by 44.7% in 2022, while the timber/woodworking industry contracted by 12.5%. The chemical industry was also negatively affected due to various obstacles to fertilizer export. Other sectors, such as food, metal-working, and pharmaceutical industries, benefited from the Russia/West conflict and divorce. The latter industry grew by 8.6%, while metal-working was up by 7.7%. Oil production increased by 2.1%, while gas extraction decreased by 13.4%. At a glance, it looks as though the structural transformation of the country’s industrial output will continue well beyond 2023. This year industry, as a whole, will likely grow moderately, as those sectors that strongly contracted in 2022 will show some growth. As the conflict with the West can only escalate, one may expect greater demand for weaponry, which will support the metal-working segment and metallurgy. Manufacturing can grow this year by 2-3%, while the mining sector will contract. Albeit, it is impossible to...