The HSE reported a minimum of business activity in the regions since the beginning of the crisis

Only in 30% of Russian regions, economic activity increased in June, the HSE index showed. Its value has become minimal since the beginning of the crisis. Worst of all things are in trade,

The composite index of regional economic activity (REA), which is monitored by the HSE Development Center, fell in June to its lowest level in four months of the sanctions crisis - 39.8%, the institute said. Researchers recorded an anti-record in May of the pandemic 2020, when the all-Russian lockdown was in effect, then the index value was 18%.

The REA index is calculated on the basis of monthly Rosstat data on the dynamics of the five most important sectors of the economy (industry, construction, retail trade, wholesale trade, paid services to the population) by region. An index value below the watershed of 50% indicates a decline in economic activity in its regional dimension.

According to HSE experts, in June the decline occurred in 70% of subjects, the deterioration of the situation was observed in three of the five most important industries. Back in early 2022, economic activity was growing in more than 70 regions of the country out of 82 for which the study is being conducted.

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Where is the biggest decline?

Most of all, economic activity in June compared to last year declined in retail and wholesale trade, the researchers write. In industry and construction, there was no pronounced decline - the growth and decline of the index occurred with approximately the same frequency in the regions. Paid services became the only sector in which the progress of business activity was revealed. Of all the federal districts, the strongest decline was observed in the Urals and the Volga. Growth compared to last year remained only in the Far East and North Caucasus districts.

Despite the fact that the June index exceeded 50% in 25 subjects, there was not a single region where economic activity would increase in all five basic sectors. In May, such regions were Dagestan and Chechnya. The growth of economic activity in the regions of the North Caucasus District, which are considered “depressive”, can be explained by the fact that the real sector in them is not so large that the changes taking place in it negatively affect the economy of the region as a whole, believes Vladimir Klimanov, DIRECTOR of the Center for Regional Policy of the RANEPA . “In world practice, it is believed that regions dependent on the federal center are less resistant to shocks, and in RUSSIA, on the contrary, highly subsidized entities are more stable in a crisis, because the prevailing public sector is less susceptible to negative impact,” he notes.

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In four regions of the country, all five sectors experienced a decline in economic activity - this happened in the Kaluga and Lipetsk regions, as well as in Mari El and Chuvashia. At the same time, in June, the number of regions where the situation worsened in four sectors increased sharply, from 15 to 26. significantly higher,” the HSE review says.

The decline in business activity in the regions is due to the fact that by now the previously formed reserves are exhausted, and the disruption of supply chains and the imposed sanctions limit the supply of new equipment, materials and components, said Maksim Pershin, Deputy Director of the ACRA Sovereign and Regional Ratings Group. “These factors primarily negatively affect manufacturing industries, in particular engineering,” he notes. Klimanov also points to the inertial nature of the economic downturn. In addition, in March-April, the real sector was supported by the rush demand for goods, he recalls.

The exit of the Russian industry from the sluggish crisis is being hampered, says the HEAD of the laboratory of market surveys at the Institute for Economic Policy. Gaidar Sergei Tsukhlo. According to the latest surveys of enterprises, which he provided to RBC, in July the demand for industrial products was even worse than in March. Many of the respondents complain about the lack of imported raw materials and components - in July only 20% of enterprises were adequately provided with them after 31% in June.

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How the regions are coping with the crisis

Despite the crisis, according to the results of five months of 2022, regional revenues increased markedly compared to last year, ACRA calculated based on data from the Unified Budget System Portal. The total income of the subjects in January-May reached 7.17 trillion rubles, having increased by more than a quarter compared to the results of the same period last year - this growth was a record for the entire history of observations. Income tax revenues increased the most (+48%). However, inflation in May was very high - more than 17% in annual terms.

Now the Russian economy and financial system is supported by mining: given the high prices for resources on the world market, it provides significant revenue to the budget system, explains Pershin. “What will happen in the future will depend on many factors: the speed of the structural restructuring of the Russian economy, the replacement of Western components, the situation in the commodity markets,” he says.

For two quarters of 2022, the consolidated budgets of the regions showed a surplus of 1.12 trillion rubles. (this is a general indicator; the Treasury has ceased to publish data on individual subjects since April). However, at the end of the year, regional revenues are likely to fall and a consolidated deficit of regional budgets will be recorded, Klimanov suggests. “A more accurate forecast with an analysis of multidirectional trends is hindered by information hidden from public access,” he points out.

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