Studies Eastern European Markets

Eastern European Markets

(May 2011)

The Leningrad Region in 2010. Biannual Economic Review
University of Eastern Finland – Karelian Science Centre, CEMAT 2010


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The region is on a recovery path

During 2010, economic indicators started to confirm that the Leningrad province is on a firm path to recovery from the 2009 slump. This is largely owed to the versatile regional
economy, which enables dispersion of negative shocks to the economy and allows the region to take benefit of the first sectors experiencing recovery.

Growth was recorded throughout the industrial sector and retail sales performed very well as well. Exports thrived due to rising global oil prices. The biggest obstacle in the way of full scale recovery is the investment sphere. Fixed investments in the region grew quickly, but were very heavily dependent on state supported projects, while pure private sector investments were still in a slump. This slump was also visible in foreign investments, which declined by half.

Forecast on economic development in Leningrad province for 2011

CEMAT’s May 2010 forecast for Leningrad province’s industrial production growth for 2010 was 9% and for retail trade growth 12%. Our industrial production forecast was very well in line through January-October but very high growth rates in the last two months of the year lifted the whole year figure up to 15%. This might have related to the notable increase in transport infrastructure investments in the last quarter of 2010 or completion of major industrial order(s). The first half development of 2011 might prove to be stronger than our anticipation due to notable infrastructure projects involving public financing. However, as the private investment activity is still modest and the low base effect of 2010 is exhausted, we believe that growth rate will somewhat moderate in 2011. Our forecast for regional industrial production growth in 2011 is 11%.

Our 2010 forecast for retail trade growth was quite close to the actual 11%. As in our previous forecast, we expect a moderation of retail trade in the first half of 2011. However, contrary to our earlier notion, the acceleration of growth in the second half will most likely be less robust. This is due to record fast growth in global food prices and high energy prices for which there is no major ease in sight. Thus, for 2011 we expect Leningrad province’s retail trade growth to be around 8%.

In the figures below we no longer include single month growth figures due their high volatility and revisions by the statistical authorities. Thus, to show the relevant trends we include only four month moving average and its corresponding
forecast.

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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.

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


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