(December 30th 2010)
Murmansk Province in the first half of 2010. Biannual Monitoring Review
Weak recovery taking place in Murmansk province,
Many economic indicators of the Murmansk region are indicating that a modest recovery is taking place. Favorable price development of the region’s main industrial items has heavily contributed to this result. However, the recovery is still very frugal as investments both domestic and foreign are at a virtual standstill, hindering more stable long term prospects.
However, some positive issues have risen concerning the region’s long-term situation. The city of Murmansk climbed to 22nd place in the Forbes ranking of best Russian cities for business. Recently, the region’s application for a special economic zone concerning transport was approved by Moscow. If this project is fulfilled as planned, it would bring a huge economic injection to the region as it would involve large projects such as constructing a new rail road.
The Murmansk region has also increased its international profile: in October 2009, it held the first Murmansk Economic Forum which gathered over 1000 participants from many countries. The Shtockman gas field megaproject is repeatedly delayed, but there are some indications that its fulfillment is becoming more concrete. Finland has increasingly acknowledged the possibilities of the Barents region. Also, Canada and France are increasing their presence in the region.
Along with other Russian regions, the Murmansk province experienced a notable decline in industrial production during 2009. However, the drop was not as severe in Murmansk (-6.7% vs. -10.8% in Russia) since the region has already suffered from slow to negative industrial growth during past years (see table). In the 1H (first half) of 2010 however, it seems to have returned to a more positive position.
The production recovery can be traced largely to the extraction of minerals (16.1% growth) as the manufacturing industry was still recording a 4.5% decline. This is especially bad taking into consideration that in 2009 it had already declined some 10%. The EGW-industry remained at zero growth. Growth in the extractive industries was attributable to apatite concentrate and non-metallic materials, as iron ore production was in stagnation.
However, the money value of iron ore production grew considerably, reflecting the global price increase in metals. None of the major manufacturing industries metal products, food and chemical were able to report notable growth in production. The fishing industry continued with 2009 levels of growth while meat and dairy production declined in the 1H of 2010. Agricultural production was still in a decline of more than 3%, and the decline was mostly due to weaker milk and egg production.
The agricultural sector was subsidized considerably through budgetary funds by some 300 million RUR from 1Q to 3Q (of which some 20% came from the Federal budget). Financial aid was received mostly in the form of reimbursements for interest on loans. The fishing industry was able to continue with its 2009 rate, but could not generate notable growth either.
When looking at the monetary value of shipped output, manufacturing recorded a stunning 44% growth, dwarfing the extraction industry’s 16.9% growth and EGW’s 16.4% growth. In the manufacturing sphere, the improvement was mainly due to the JSC Apatite’s resumption of subcontracting its fertilizer production with local manufacturing companies, as well as favourable price developments in metals. These developments reflected the structure of the industry sector’s output value (see graph below).
Regional authorities are currently working on industrial development related to efforts of region-wide improvement in competitiveness. Currently under preparation is a project aiming at establishing an industrial park in Monchegorsk, hoping to create 20-30 small industrial enterprises. Also there are plans for a construction of an industrialtechnological park “North Crystals”. Both projects are being envisaged as public-private partnerships.
Economic Monitoring of North-West Russia (http://www.hse.fi/ecomon)