tutkimuia

Eastern European Markets

(December 30th 2010)

The Republic of Karelia in the first half of 2010. Biannual Review.
University of Eastern Finland – Karelian Science Centre, CEMAT 2010

Karelia has a new Governor

After twelve years of being the Head of the Republic, Sergey Katanandov resigned in June 2010. To succeed him, President Medvedev appointed Andrei Nelidov, who previously worked as the Karelian representative in the Federation Council (the upper chamber of Russian Parliament).

Nelidov immediately brought new people to the Republican Government, while almost all key figures of the Katanandov team have been dismissed. In his first interviews, Nelidov promised major changes in the economic development strategy, and ordered to prepare a new development programme for Karelia. In the meantime, economic performance of the Republic improved notably in the first half (1H) of 2010. Its industrial output grew in real terms by 16.3%, corporate profits rose 5.6 times, the volume of construction increased 1.5 times, and real personal incomes grew by 2.9% compared to the 1H of 2009.

Karelian gross regional product

According to Karelian Government forecasts, from 2011 to 2013, the economy will grow by 2.5% to 4.0% annually. During the same period, industrial output and investments in fixed capital are expected to grow by 3.3% and 4.5% to 6.0% respectively.

The dramatic rise in industrial output occurred mainly on account of OAO Karelsky Okatysh, which increased its production of iron ore pellets by 39%. This increase was thanks to a rise in demand for pellets on part of its owner OAO Severstal, which was recovering from the slump in the 1H of 2009. Growth in the food industry was achieved on account of a Karelian branch of OAO Rosspirtprom, which increased its output of vodka 7.7 times, to 306.6 thousand dekalitres.

Karelsky Okatysh leads industrial growth

The dramatic rise in industrial output occurred mainly on account of OAO Karelsky Okatysh, which increased its production of iron ore pellets by 39%. This increase was thanks to a rise in demand for pellets on part of its owner OAO Severstal, which was recovering from the slump in the 1H of 2009.

Growth in the food industry was achieved on account of a Karelian branch of OAO Rosspirtprom, which increased its output of vodka 7.7 times, to 306.6 thousand dekalitres.

Dynamics of industrial output in Karelia

A high growth rate was achieved in the electric and electronicgoods industry, where output grew in real terms by53.9%, thanks to Finnish-owned OOO AEK and OOO Elektrokos.

The former increased its production of electric wire harnesses for trucks 2.2 times, while the latter increased the production of printed circuit boards by 13% compared
to the 1H of 2009.

The wood-working industry also demonstrated a high rate of growth, as many enterprises have recovered from the recession. Thus, the production of sawn timber grew at ZAO Solomensky Lesozavod (by 38%), OAO Medvezhiegorsky LPKh (by 71%), OOO Svedwood Karelia (by 109%), ZAO Karlis Prom (by 41%), OOO Setles (by 56%) and OOO LDK Segezhsky (by 12%). Furthermore, OOO LDK Bumeks increased its production of plywood 2.6 times.

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Economic Monitoring of North-West Russia (http://www.hse.fi/ecomon)
The project “Economic Monitoring of Northwest Russia” was launched in 2000 with the aim to provide regular, comprehensive and systematic reporting on the socio-economic development in the region. The monitoring covers today six Northwest Russian regions: The City of St Petersburg, Leningrad, Kaliningrad, Murmansk and Novgorod provinces, and the Republic of Karelia.

More Information
Professor Riitta Kosonen
Director, Center for Markets in Transition (CEMAT)
riitta.kosonen@aalto.fi
cemat@aalto.fi


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