Updated at 13:48,15-08-2017

Russian industrys indicators reached level of 2015, but Belarusian industry is unlikely to follow

Belarus in focus

In May 2016, industrial production index in Russia grew for the first time since January 2015. Russian industry has benefited from devaluation of the Russian rouble and falling prices on raw materials and restored production volumes. As competitiveness of Russian enterprises improves, Belarusian enterprises are likely to lose a share of the Russian market and Belarusian industrys performance therefore is unlikely to improve.

Rosstat and Belstat published data on industrial production in January-May 2016.

According to Rosstat, for the first time since January 2015, Russian industry has shown production growth. In January - May 2016, industrial production index was 100.1%. Industrial growth drivers in Russia included: the mining industry, food production, chemical industry and light industry. Belarusian industry has somewhat slowed the decline rate: from 6.8% in January 2016 to 1.9% in May 2016. In Belarus, the main drivers included engineering, manufacturers of electrical equipment and light industry. Problems with sales in the potash industry were the main culprit for industry not to achieve results of 2015.

Due to devaluation of the Russian rouble, Russian industry has cut staff costs and saved on raw materials in export-oriented industries. Amid reduced imports of foodstuffs, agriculture has increased production of raw materials for the food industry and ensured higher demand on fertilisers and pesticides from the chemical industry. Only a few sectors of Belarusian industry were able to take advantage of lower costs due to devaluation of the Belarusian rouble and increase exports of products to foreign markets. The growth in mechanical engineering amid the lack of increase in exports could indicate that farmers boosted domestic demand for machinery.

The situation in 2016 is different from the post-crisis period last year. Due to the Russian embargo on exports from some countries, Belarusian dairy industry may anticipate an increase in demand on the Russian market. Meanwhile, Russian poultry producers have met the demand on the domestic market in full and they would like to export their products to foreign markets.

Exports of Belarusian tyres to the Russian market decreased by one-third in January - March 2016. A similar situation was with exports of trucks. In the given circumstances, Russian enterprises are likely to increase their share on the domestic market by pushing out other producers, including from Belarus. In addition, due to the relatively stable financial situation, they may enhance expansion to foreign markets, which, amid the lack of borders within the EEU, will lead to the reduced share of the Belarusian producers on the Russian market and will increase imports from Russia to Belarus. As a result, Belarus is likely to reduce production in engineering and rubber manufacture, and is unlikely to reverse the fall in industrial production.

The Russian industry, unlike Belarusian, has been able to somewhat recover and reach the 2015-level. Crisis environment has increased the competitiveness of Russian companies, which is likely to lead to further reduction in the share of Belarusian goods on the Russian market and will not allow recovering production in Belarus.