Industrial Districts: are They Possible on the Northern Caucasus?

Daniil A. Sitkevich – Researcher of the Gaidar Institute; PhD student of the Faculty of Economics, Lomonosov Moscow State University. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Despite all the efforts, North Caucasian Federal District is still the most underdeveloped region of Russia. In this article, we try to draw attention on the experience of the Southern European countries to stimulate economic development of backward regions by supporting the genesis of “industrial districts”, which are a form of cooperation between neighboring small and medium firms, united by the shared infrastructure and set of rules and which are working in the same industry.

This policy can be effective only if there are enough prerequisites for the development of industrial districts inside the community. So, in order to understand if such a policy is possible in the Northern Caucasus, we made a quality research in 3 villages at the republic of Dagestan – Kubachi, Tsyyshi and Balkhar, which have some similarities with the Italian industrial districts. The results show that economic structure close to industrial districts can be observed only in Kubachi, and the development of industrial districts in other villages is slowed down by the lack of social capital, by the “lifestyle entrepreneurship” culture, which is widely common in Dagestan and restrains cooperation.

Key words: economic development, regional development, Northern Caucasus, industrial districts, cooperation.

Russian Industry in October-November 2019

Sergey V. Tsukhlo – Head of Business Surveys Department of the Gaidar Institute, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

In October-November 2019, the Russian industry retained output growth at the level of the previous months despite the negative dynamics of demand and growing excessiveness of stocks of finished products. Enterprises’ plans and forecasts were not subjected to a reverse adjustment, while plans to hire workers demonstrated optimism which was untypical of this season. In Q4 2019, industrialists reported about cuts in the minimum lending rates offered by banks.

Key words: Russian industry, demand, output, employment, finished goods inventory, industrial lending, personal, investments, actual changes and expectations.

Russian Regions: Economic and Demographic Trends

Natalia V. Zubarevich – Main Researcher of the Russian Presidential Academy of National Economy and Public Administration, Doctor of Geographic Sciences, Professor (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Ramilya R. Khasanova – Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Yulia F. Florinskaya – Leading Researcher of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Geographic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

As of September-October 2019, the development of Russian regions has improved. Industry and retail trade grew in most regions, albeit slowly. The growth of household incomes started. In almost half of the regions dynamics of investments and paid services is negative. Budget revenues grew noticeably, and budget expenditures, including social expenditures, also increased significantly.

In January-October 2019, the natural decline of the Russian population increased. It amounted to 259.6 thousand people. 1.25 million children were born (7.6% less than in the same period of 2018), 1510.2 thousand people died (1.8% less).

In the first three quarters of 2019 migration increased compared to the "failed" 2018, it has recovered to the level of earlier years. Migration compensated for 81.6% of losses from natural population loss. The number of labor migrants in the Russian Federation continued to grow, with an increase of 5.4% compared to the previous year. The share of those legalized in the Russian labor market has stabilized in recent years at the level of 67–70% of all those who arrived for the purpose of work.

Key words: regional development, population income, budgets, mortality, fertility, migration.

Industry Started to Lack Labor in Q3 2019

Sergey V. Tsukhlo – Head of Business Surveys Department of the Gaidar Institute, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The results of monthly business surveys have shown a somewhat decrease in the level of satisfaction of the Russian industry with the results of Q3 2019 as compared to the record-high indicators of the previous quarter. The industry adaptability index (normality) fell 3 points after it had achieved its historical maximum in Q2 2019 over the entire period of calculations (1994–2019). A decrease in the level of satisfaction with the current state of things measured by the index of normality is in harmony in the industry with the stable positive value of the overall indicator, that is, the industrial confidence indicator. More importantly, late in Q3 2019 the latter amounted to the five-month maximum, which is quite in line with the data of the official industrial statistics.

Key words: Russian industry, index of industry adaptation, stock of finished goods, stock of raw materials, stock of materials, demand, employees supply, financial/economic situation.

Household Income, Bank Loans and Social Well-Being

Elena E. Grishina – Head of Department of Labour Markets and Pension System Research of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Dmitry M. Loginov – Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Aleksandra G. Polyakova – Leading Researcher of the Russian Presidential Academy of National Economy and Public Administration, Doctor of Economic Sciences, Professor (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Aleksandra Ya. Burdyak – Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

In the third quarter of 2019, real disposable income increased by 3.0% year-on-year. Such a significant growth in income was observed for the first time since 2013. The growth of disposable income was facilitated by a decrease in the growth rate of household debt on loans and by an increase in labor income, social payments and property revenues.

In January-September 2019, the level of income inequality of the population slightly decreased as compared with the same period of 2018. A significant growth in real incomes of the population did not lead to the same increase in retail trade turnover.

As of November 1, 2019, the population’s debt on credits reached a record value of Rb 17.3 trillion, having increased by 19.4% in annual terms. The volume of bank deposits of individuals as of the same date amounted to 29.5 trillion rubles, an increase of 8.6%.

Most often, people assess the economic situation in the country as average, while the number of negative assessments exceeds the share of positive ones. In general, the majority of the population in 2019 did not change their subjective assessment of consumer opportunities. At the same time, the population’s ability to pay has decreased with the purchase of medicines, payment for medical services, leisure activities and vacation expenses.

Key words: money income of the population, expenditures and consumption, bank loans, savings, social well-being.

Priorities of Russian Development Assistance in 2018

Yury K. Zaitsev – Senior Researcher of the Foreign Trade Department, Russian Presidential Academy of National Economy and Public Administration; Deputy Director of the Institute of International Economics and Finance, Russian Foreign Trade Academy, Candidate of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Alexander Yu. Knobel – Head of Foreign Trade Department of the Gaidar Institute; Director of Center for Foreign Trade Department of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

According to statistics published in October 2019, Russia maintained a relatively high level of funding programs in the field of international development assistance in 2018. A large share (63%) of Russian aid was provided as in the past on a bilateral basis, and the largest recipients remained Cuba, DPRK, Kyrgyzstan and Tajikistan. Moreover, in addition to direct assistance, Russia finances these countries also in the framework of cooperation with international organizations. In 2018, distribution of aid was mainly related to healthcare and food security as well as to debt relief which exceeded $ 400 million.

Key words: international development, Russian aid to development, developing countries.

Youth Employment. First Job

Tatyana L. Klyachko – Director of Center of the Economics for Continuing Education of the Russian Presidential Academy of National Economy and Public Administration, Doctor of Economic Sciences, Professor (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Elena A. Semionova – Leading Researcher of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The situation of the youth on the labor market is the subject of numerous research carried out all over the world. A particular attention is attached to the process of a switchover from education to employment as the quality of the first job has a serious impact on the further career of young people. The Center for the Economy of Permanent Education of the Institute of Applied Economic Research, RANEPA carries out the monitoring of employment of the youth in different regions of the Russian Federation to keep track of current trends and changes in youth employment. The article presents the young people’s experience related to their first job and the specifics of the first job for young men and women.

Key words: monitoring, youth employment, first job.

Measurement of Total Factor Productivity Growth in Russia with U.S. BLS Methodology

Pavel N. Pavlov – Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Andrey S. Kaukin – Head of Department for System Analysis of Sectoral Markets of the Russian Presidential Academy of National Economy and Public Administration; Head of Sectoral Markets and Infrastructure Department of the Gaidar Institute, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The paper presents an assessment of total factor productivity growth in Russia in 2001–2018 with U.S. Bureau of Labor Statistics methodology and RLMS data. Using U.S. BLS methodology and methodology of RANEPA and The Gaidar Institute for Economic Policy we obtain comparable in magnitude estimates of TFP growth. During the global financial and economic crisis of 2008–2009 there was a local increase in labor composition index in Russia due to the release of low-skilled labor, these results are consistent with foreign experience. Identified long-term stagnation of the labor composition index raises the need for more intensive human capital investment in Russia.

Key words: TFP, labor input, quality of labor (labor composition), U.S. BLS, RLMS.

Commercial Banks’ Financial Results in Q1-Q3 2019

Sergey A. Zubov – Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences, Associate Professor (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

In January-September 2019, banks’ profits increased largely as compared to the same period of 2018. It has mainly happened owing to the introduction of the new accounting procedure for loan loss provisions and the handover of rescued banks to the Banking Sector Consolidation Fund. In the near future, some slowdown of the banking sector’s profitability growth can be expected and this will be driven by the following factors: cuts in the interest rates, a higher rate of defaults on loans and the regulator’s moves to slow down the growth rates of consumer lending. However, based on the results of the first three quarters of 2019 it should be taken into account that the ratio between the volume of consumer loans and the volume of deposits (60% against 80%–90% in the EU) is the evidence of the remaining strength of growth in lending to individuals.

Key words: Russian banking sector, profitability of the banking sector, banking profit, consumer loans, the volume of deposits, overdue debt.

Investing in Fixed Capital in Recent Economic Policy in Russia

Olga B. Berezinskaya – Researcher of the Russian Presidential Academy of National Economy and Public Administration (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Alexey L. Vedev – Head of the Center of Structural Research of the Russian Presidential Academy of National Economy and Public Administration, Doctor of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Аlexandra A. Stavtseva – Junior Researcher of the Russian Presidential Academy of National Economy and Public Administration (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The specifics of the development of the investment process in the Russian economy and its new drivers correlate less with the challenge of formation of competitive products and services production. Changes in the economic policy take place in a situation where former problems hindering Russian economic growth remain unsolved. The article deals with the modification of the status and content of capital investments and the prospects of upgrading the quality of the investment process.

Key words: economic policy, capital investments, investments in machinery and equipment, investment model of development.

Survey of Current Business (September-December 2019)

Sergey P. Aukutsionek – Head of Center for Transition Economy Studies, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Andrey S. Yegorov – Senior Researcher of the Center for Transition Economy Studies, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, Candidate of Economic Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Tatyana V. Serzhantova – Senior Researcher of the Center for Transition Economy Studies, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Stanislav V. Belyakov – Researcher of the Center for Transition Economy Studies, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

In September 2019, the share of enterprises not going to take new loans from banks in the next three months decreased by 15 percentage points. The share of enterprises not purchasing equipment for 2 or more consecutive months decreased by 9 percentage points and reached its minimum value (25%); it was just as low only twice before: in 2006 and 2007.

A smooth decline of the diffusion index of output continued; it has been declining for the third month in a row and reached its lowest level in 8 months. The level of capacity utilization rate and the level of labor utilization rate decreased.

Key words: Russia, industry, industrial enterprises, price level, wages, employment, output, investment, indebtedness to banks, order-book level, stocks of finished products, capacity utilization rate, financial situation, production restrictive factors.

Consumer Prices: a Lengthy Disinflation Period

Alexandra V. Bozhechkova – Head of Monetary Policy Department of the Gaidar Institute; Senior Researcher of the Russian Presidential Academy of National Economy and Public Administration, Candidate of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Pavel V. Trunin – Head of Center for Macroeconomics and Finance of the Gaidar Institute; Leading Researcher of the Russian Presidential Academy of National Economy and Public Administration, Doctor of Economic Sciences (Moscow, Russia). Е-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

The Bank of Russia’s decision to reduce the key rate by 0.50 pp to 6.5% was caused by an inflation slowdown to 3.8% in October 2019 relative to October 2018, with a high probability of its continuing downward movement. In this connection, the Bank of Russia has revised its inflation projections for 2019 from 4.0–4.5% to 3.2–3.7%. It is expected that the annual inflation index in 2020 will amount to 3.5–4.0%, and then it will be hovering around its target level of 4%. Thanks to this year’s good harvest, a slow growth rate of domestic demand, and the ruble’s strengthening, inflation slowdown may become even more pronounced than the Bank of Russia is currently expecting it to be. These developments may once more prompt monetary policy easing before this year’s end.

Key words: inflation, basic inflation, annual inflation, prices, consumer prices, monetary policy, key interest, rate, target, Bank of Russia.