Rising wages and investment: Moscow economy in the first half of 2017

Rising wages and investment: Moscow economy in the first half of 2017
Photo: Photo by the Mayor and Moscow Government Press Service. Yevgeny Samarin
Wages in Moscow have been growing faster than average in Russia. Industrial production is on the rise, and investors continue to co-finance urban projects. Read the story on mos.ru.

The growth of nominal wages was the main evidence of Moscow’s surging economy in the first six months of 2017. Nominal wages increased by nearly 8 percent from January to the end of April. The upward trend was reported in all sectors, excluding energy, restaurants, sports and repairs.

 

Real wages increased by 2.3 percent compared to January-April 2016. Wages grew faster than inflation in manufacturing, in wholesale trade, IT, government management, education, healthcare, finance, insurance, research and tourism.

Real wages in manufacturing increased by an average of 8.7 percent, primarily in the petrochemical, automobile, pharmaceutical, garment and food sectors.

Last year, wages across Russia and in Moscow increased almost to the same level (the difference was only 0.3 percent). But the growth dynamics varied from one month to another.

Registered unemployment remained low in Moscow at only 0.46 percent. According to the leading Russian online recruitment company HeadHunter, tension on the employment market is gradually decreasing. In April 2017, employers were more active than job seekers.

The inflation rate slowed from 8.1 percent in May 2016 to 5.1 percent in May 2017, largely due to the fact that the growth in the prices of services slackened by 50 percent. In the first five months of 2017, the decline in prices was especially steep in insurance, recreation and consumer lending. The biggest price drop in the food sector was reported for oranges: their price plunged by 13.8 percent. The prices of sugar, buckwheat and eggs decreased as well.

From January to May 2017, prices in Moscow grew by 2.4 percent compared to December 2016, or 0.7 percent more than average for Russia. The inflation rate rose faster in April and May, primarily due to the rising prices of fruit and vegetables.

Business and trade

Another achievement in Moscow is the steadily growing number of sole proprietors. The number of new businesses registered in Moscow between January-May 2017 was 20.8 percent larger than in the same period of 2016.

Overall, the number of sole proprietorship increased in Moscow by 11.1 percent or 27,000 compared to the same period of last year. The number of new companies went up 15.2 percent. The city is fighting fly-by-night companies. Thanks to its measures, their number has fallen by 11.8 percent.

The volume of retail grew by 5 percent in current prices over the first five months of 2017 year on year, andretailers reported a 13.2 percent increase in trade. Retail shops in large stores accounted for some 53 percent of turnover.

Between January-May 2017, the production of electrical equipment and pharmaceuticals went up some 25 percent. The manufacturing of office furniture increased as well.

Last year, Moscow ranked first among Russian regions by the ease of paying taxes ranking of PricewaterhouseCoopers (PwC). Russia placed 40th in the World Bank’s Doing Business index for 2016, the highest score ever and a leap of 80 points since 2011. Russia reported major improvements in starting a business, where it rose by 15 points, to 26th place from 41st place last year, and in the ease of dealing with construction permits (up four places from 119th to 115th. It also maintains high marks in registering property (9th place) and getting electricity (30th place).


Growing investments

Investors continue to co-finance Moscow’s projects, primarily construction. The volume of construction increased by 7.4 percent from January to May 2017, and investment in construction projects soared by nearly 29 percent compared to the first quarter of 2016.

Natalya Sergunina, Deputy Mayor for Economic Policy and Property and Land Relations, said that the share of Moscow in total investments in Russia reached 12 percent. In 2016, investments in fixed assets increased by 0.7 percent in comparable prices year on year and reached 1.7 trillion roubles.

Over the past six years, investments in the Moscow economy grew by over 50 percent. Some 870 billion roubles have been invested in the development of the Troitsky and Novomoskovsky administrative areas over the past five years. The city only provided some 10 to 15 percent of these funds, and the rest came from private investors.

The city has created favourable conditions for investors, who are willingly developing their businesses here. All components of the Moscow Government’s economic policy are aimed at enhancing the investment activity, including a stable budgetary policy, tax incentives, controlled rates of growth, expanding investments from the city budget, as well as measures to lower administrative barriers. The key factors of enlargement of investments are the development of public-private partnerships and measures to stimulate investment in the real economy sector.