Russia’s Central Bank said earlier that the Russian economy has demonstrated growth rates below the regulator’s expectations since the beginning of the year. The weak dynamics of investment activity is one of the reasons for poor economic results, the Bank of Russia has noted.

MOSCOW, August 5. /TASS/. The implementation of National Projects may notably contribute to the growth of investment activity in Russia, which is one of the national development targets, experts interviewed by the "Future Russia. National Projects" portal operated by TASS suggest. Analysts expect the growth rates of fixed investment in Russia to accelerate substantially thanks to investments both from the public and from private sectors in the second half of this year, as well as in 2020.

Particularly, in the first quarter of 2019 the annual rate of fixed investment growth slowed down to half a percent from 2.9% in the previous quarter, according to the Central Bank’s statistics. Whereas in the second quarter of 2019, fixed investment slipped by 1.3-1.8% compared with the same period last year.

Experts believe that the Q2 dynamics is due to the high base effect of 2018.

"Last year the brisk investment growth was triggered by a prominent state’s impetus related to the completion of the Power of Siberia project and the implementation of other state projects," Raiffeisen Bank’s macroanalyst Stanislav Murashov said. Previous state projects have been finalized, whereas National Projects have not fully started yet, which is why there has been a slowdown in investment, he explained.

"From the side of the public sector, the decline in investment is connected with the high base of Q2 2018. Budget expenditures have been reduced, the application of funds for National Projects falls behind the schedule. From the side of private and quasi-private sectors, the slowdown may be related to the tightening of credit terms as long-term credit rates peaked in the first half of this year," Andrei Melaschenko, an analyst at Renaissance Capital, added.

The investment activity slowdown in the second quarter of this year may have resulted from unstable environment on the developing markets in Q3-Q4 2018, head of the market analysis department at Otkritie Broker Konstantin Bushuyev said. "We suggest that the overall unstable situation on developing markets in Q3-Q4 2018 may have echoed, which has prompted the Bank of Russia to raise rates locally in the second half of last year. Real economy usually responds to the financial markets volatility with a 6-9 months lag," he noted.

Growth expected

A total of 1.7 trillion rubles ($26 bln) have been allocated for implementation of National Projects in 2019. However, according to the figures provided by the Accounts Chamber, only 32.4% of funds were applied in 1H 2019, which is much higher than previously, but still lower than the average level of the federal budget execution (42.5%).

"If the state manages to ‘transfer’ National Projects from framework forms to the economic basis in the second half of 2019 and in 2020, we expect fixed investment growth rates to return to the level of 1.5-2.5% in annual terms by the end of 2019 and the level of 3-5.2% year-on-year in 2020," Chief Analyst at BKS Premier Anton Pokatovich said.