61%

was the average capacity utilization level at Russian manufacturing companies in July, the lowest number seen in three years.

The performance demonstrated by Russian industry at the beginning of the second half of the year does not give cause for hope among many experts regarding continued growth in industrial output, which had been seen in the spring of 2014. Entrepreneurial enthusiasm is gradually diminishing and the sector is once again drifting towards stagnation, each month moving either closer to a state of recession or sluggish growth depending on the economic situation and level of state investment. This was the conclusion drawn by experts from the HSE’s Centre for Business Tendency Studies, which operates under the Institute for Statistical Studies and Economics of Knowledge (ISSEK) after studying the results of a survey sent by Rosstat to approximately 4,000 leaders of medium and large industrial companies.

Only 18% of respondents said they saw production growth increase compared to June, with 64% saying that they had maintained June levels. This is comparable only to the results seen in the late 2009 in connection with compensatory growth following the recession. The share of companies that saw their own financial resources increase was only 11%, one of the worst indicators noted in the entire post-crisis period.

The negative effect on entrepreneurial behaviour was caused not only by the usual economic factors, but also by the uncertainty due to possible sectoral sanctions imposed by Western governments and the statement by Russia’s Minster of Finance regarding an increased tax burden for entrepreneurs in the near future.

According to Georgy Ostapkovich, Director of the Centre for Business Tendency Studies, only a small number of entrepreneurs will continue to work as usual after adopting new tax conditions imposed by the state. Some companies that are unable to bear the fiscal burden will either go out of business or move into other, more profitable areas. Most entrepreneurs who are accustomed to such changes in the rules during the game will take part in informal business, raise the prices of their products and optimize their employee headcounts.