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The New Crisis in Russia: Regions and Cities Projection

Natalia Zubarevich from IISP examines the factors leading to the new crisis in Russian regions. Industrial output, investment, and money incomes have seen declines, impacting different regions. Unemployment remains low but stable, with structural changes affecting the labor force. The spatial structure of the Russian population is shifting, with migration patterns changing. The crisis presents challenges for different regions and cities, requiring unique solutions for support and recovery.

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The New Crisis in Russia: Regions and Cities Projection

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  1. New Crisis in Russia regions and cities projection Natalia Zubarevich IISP

  2. The New Crisis Factors • The new crisis has started in 2013 due to internal factors (institutional barriers). Economic development model of 2000th based on oil rent growth has been completed. Russian economy has stopped growing for a long time. • External shocks (since mid-2014) accelerated decline. Proportion of oil price drop and sanctions negative influence was 3:1

  3. Regional budgets destabilization – three years deficit and debts (2013-2015). It started after Putin's decrees implementation Investment – accelerating reduction since 2013 Money incomes and wages– stagnation started from the beginning of 2014 and recession - by the end of 2014and during 2015 Industrial output stagnation in 2013 and low growth in 2014. Drop has started since Feb.2015. and stopped by June. Military industry is still growing due to federal budget funding Unemployment rate is extremely low The new crisis trends differ from previous ones

  4. Regional budgets deficit 2013 – 642 bln rubles and77 regions2014 –469bln rubles and 75 regions, 2015 – 191bln rubles and 76regionsDeficit to regional budgets revenues in 2015, %

  5. Debts - 2,5trillion rubles (Dec. 2015) or 33% of regions budget revenues without transfersDebts to budget revenues without transfers, % Center North-W South N.Cauc Volga Urals Siberia Far East

  6. Maximum risk (deficit + big debts) - 1/2 regions

  7. 2015: Federal budget deficit (2 trln rubles, 2,3% GDP)Risks for regions are growingShare of transfers, % of regional budgets revenues in 2015 Center North-W South N.Cauc Volga Urals Siberia Far East

  8. Devaluation shock sharply reduced incomes, wages and consumption. Investment, construction and processing industries decline is based on the other factors Monthly dynamics to the same month of previous year, %

  9. Economic and social indicators dynamics,%

  10. Retail dynamics: +2,5% in 2014, -9,3% in Jan.-Nov. 2015 Decline - 78 regionsRetail dynamics, % to the same period of previous year Center North-W South N.Cauc Volga Urals Siberia Far East

  11. Real money incomes decline in78regionsThe worst areUrals, Volga, Center, North-WestReal money incomes dynamics, % to the same period of previous year Center North-W South N.Cauc Volga Urals Siberia Far East

  12. Investment decline: 2013 -0,2%, 2014 -2,7%, Jan.-Sep. 2015 -5,8%Decline in 51 regions, the worst are Siberia, Urals, North-WestInvestment dynamics in Jan.-Sep. to the same period of previous year, % Center North-W South N.Cauc Volga Urals Siberia Far East

  13. Constructing decline: -4,5% in 2014 (50% of regions) -10% in Jan-Nov.2015 (61 regions) Construction dynamics in federal districts, % to the same period of previous year

  14. Industrial output: Growth is located in the regions specialized on defence industry, food industry, oil&gas extracting industries Processing industries drop faster (41 reg.)Industrial output dynamics, Jan-Nov.2015 to the previous year, % Center North-W South N.Cauc Volga Urals Siberia Far East

  15. Unemployment rateis extremely low (5,8%) and stableSeveral factors prevent unemployment growthUnemployment rate, % ILO methodology Center North-W South N.Cauc Volga Urals Siberia Far East

  16. Part-time employment Regions with the highest level, %

  17. Age structure: The number of Russian population in working ages will be reduced 10-14% by 2025 г.Annual decline – 600-800 thousands people low medium high Net Migration+600 thous.peple per year mln pop. Net Migration +200 thous.peple per year

  18. From regions to Core-Periphery modelSpatial structure of Russian populaton, % Russia-3 small towns and rural periphery Russia-1 big cities Population cities 1 million more 31-35% 500 thous.-1 million 31% thousand thousand thousand 50 thousand less small urban settlements rural settlements Russia-2 medium sized industrial cities

  19. Middle class: spatial, labor and age structure MC share of all households, % Moscow – 40% more 2011 Entrepreneurs share decline: 2007 – 13% 2011 – 11% more women men MC: 25-49 years old singles and couples less

  20. Russia-2 Low competitive industrial / depressive regions and towns Driver – industrial output decline Risks: unemployment growth Instruments to support: Active measures to support employment, unemployment benefits South – softer decline Political protests - ???? Russia -1 The biggest agglomerations Driver – money incomes and purchasing power decline Risks: market services shrinkage as well as public sector employment Instruments to suppot - NO. Urban population self-adaptation, lifestile negative transformation, emigration… Political protests??? The new crisis spatial projection from development to survival

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