Russia’s March Industrial Production Rises 4.5% Despite Sanctions

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Mitigating factors have diminished the impact of sanctions – for now

The Russian Institute of Economic Forecasting of the Academy of Sciences has stated that March’s industrial production numbers totaled 4.5% more than the same period in 2021. The increased production growth, even after anti-Russian “sanctions from hell” is attributed to enterprises having a stock of materials and products and remaining demand for Russian export products.

However, the situation is not so optimistic with domestic demand. It is precisely the low, decreasing demand which is the main obstacle for the business sector according to surveys of enterprises by the Presidential Commissioner for Entrepreneurs’ Rights.

According to the Moscow based Higher School of Economics Development Center Institute,  the stock of raw materials and spare parts is what is holding back any immediate decrease in the industrial processing industry, as “supplies are normally made by the enterprises for a period of one to three quarters.” The HSE says Russia has a cushion of several months to establish alternative supply chain channels for these products.

The Russian Federal State Statistics Service has stated that the current economic uncertainty remains the main restriction, saying “The Russian economy turned out to be secondary in relation to politics, although the economic situation can rapidly change over a short period, creating major stresses for all businesses.”

There is also the last-minute bulk-buy factor which may have attributed to March’s industrial growth. This is due to countries that depend on Russian energy supplies and are increasing their stocks of Russian raw materials ahead of sanctions. March growth in Russia’s industrial sector occurred mostly due to the increased oil and gas production while there was a drop in the transport sphere, meaning March’s results were not positive for all large enterprises.

Russian car sales and consumer lending have shown a sharp decrease in consumption in March, and this will probably be the case for the following months. In March, small and medium enterprises which are oriented towards the Russian domestic market may carry more losses than larger Russian businesses.

Russian stocks are rebounding after the initial early March shock, while the Russian ruble has regained its previous sanctions losses and is now strengthening against the US dollar.


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