Investment drought in the Russian economy: Structural characteristics and turnaround perspectives

Abstract

The investment drought of 2013-2015 in Russia is the first prolonged period of no capital investment growth in the last 17 years. After stagnation in 2013-2014, fixed capital investments in real terms have systemically lagged behind industrial output growth and GDP. Lack of capital expenditures not only lowers demand and inhibits growth of construction, machinery, industrial production and the economy as a whole, but also preserves existing structural imbalances and technological gaps in the Russian economy. The duration of investment drought and its significant disincentivizing effect on current and expected growth of the Russian economy suggest the importance of analyzing structural characteristics of the investment process and triggers of capital investment.