The Gaidar Institute of Economic Research (IEP) recently updated its market assessment for mid-April, focusing on industrial firms. The analysis shows that, in the absence of unpaid labor and with all production capacities fully utilized, demand for the products of industrial companies has risen. The picture suggests that when unemployment is near zero, there is a clear incentive to invest in expanding and modernizing production facilities. This perspective is echoed by the coverage in Kommersant.
IEP’s findings indicate that the sector’s demand in April reached levels seen in February 2022. In the March–April period, the overall sentiment improved by eight points, turning to a positive balance. The surveys also highlight the starkest workforce shortfall recorded over the entire monitoring period from 1996 to 2023, alongside an enduring capacity constraint for the third time in the history of the survey. The earlier instances of such constraints occurred during 2007–2008 and again at the tail end of 2021 into early 2022, illustrating recurring cycles of bottlenecks in capacity and labor supply.
Sergey Tsukhlo, the study’s author, notes that the capacity shortfall faced by industrial firms could be addressed relatively quickly through targeted investments, provided that there is no shortage of qualified personnel. In other words, the main lever is capital expenditure aimed at expanding productive facilities and upgrading equipment, rather than a wait for more workers to become available.
Looking ahead, the Ministry of Economic Development of the Russian Federation has issued forecasts for investment trends. The projection for 2023 points to a modest uptick in gross capital formation of around 0.5 percent against a robust base from the previous year. Looking further ahead, the ministry anticipates a more pronounced recovery in investment activity, with growth of about 3.2 percent expected in 2024, approximately 3.7 percent in 2025, and around 4.5 percent by 2026. These projections reflect a path toward strengthening the industrial base as the economy absorbs the shocks of past disruptions.
Official statements from the government signal intent to expand investment in the industrial sector. However, the path has not been smooth, with the episode of the pandemic and subsequent geopolitical events affecting momentum. The article underscores that these headwinds have tempered the pace of capital deepening, even as long-term plans remain aimed at more expansive industrial investment and modernization to support growth and resilience in the sector.