CONSUMPTION AND INVESTMENT BOOSTED RUSSIAN SECOND-QUARTER GDP…

Preliminary estimates of the developments in Russian GDP by end-use in real terms for the first half of 2001 became available in October, illustrating that the continued surge in consumption and investment is boosting aggregate output and imports this year (Goskomstat, October 2001). Both consumption and gross investment rose strongly in the first half of 2001. Household consumption increased by 11.3 percent in the second quarter and 10.0 percent in the first half of 2001 after rising 9.7 percent for all of 2000.

Data on gross investment are even more impressive than those on household consumption. This category includes changes in inventories but trends are typically dominated by gross investment in fixed capital. Although gross investment slowed modestly in the second quarter of this year, a 25.0 percent increase in the first quarter followed by 15.8 percent growth in the second still provided for a breakneck 19.4 percent pace for the first half of the year compared with the already impressive 17.3 percent registered in full-year 2000. The boom in investment in fixed capital in 2000-2001 has a good deal to do with the improved fortunes of the oil sector in the wake of sharp increases in world market oil prices last year. And though prices have dropped this year, the healthier financial condition of Russia’s oil producers and anticipation of continued improvements in their tax treatment have kept investment in oil production and pipelines growing rapidly.

…GROWTH CONTINUES IN THIRD QUARTER.