Were rightly feared, but not that

COVID-19 now scares the industry not with a lack of demand, but with prices for components.

At the beginning of the COVID-19 crisis, the biggest problem for Russian industry seemed to be the likely decline in demand. But by July 2021, the negative effect of this factor had undergone the strongest adjustment and retreated to second place, according to polls by the Gaidar Institute. The most serious negative consequences of the crisis today, enterprises consider the increase in prices for raw materials and materials. This is the only factor that continues to expand its negative impact on the Russian industry.

The July Bulletin of Industry Conjuncture Surveys, conducted since 1992 by the Gaidar Institute (IEP), contains the results of the fourth (since April 2020 - the peak of restrictions) assessment by enterprises of the consequences of the impact of the COVID-19 crisis on them. “The four points obtained provide an opportunity to look at the dynamics of this unusual crisis from the point of view of enterprises,” notes the author of the study, Sergei Tsukhlo.

Thus, at the beginning of the crisis, it was assumed that the biggest problem for the industry would be the decline in demand. However, if in April 2020 more than 70% of respondents thought so, then as the pandemic progressed, this figure dropped to 40% of respondents in July 2021. The first place among the most noticeable consequences of COVID-19, from the point of view of enterprises, is now an increase in the prices of raw materials and materials (see graph). This consequence of the crisis was the only one that, as it developed, increased its prevalence in Russian industry. Now it is indicated by 71% of enterprises against about 60% in April last year.

Another significant factor - "the need to create additional reserves of raw materials" - was able to only return to its initial positions in five quarters, but rather modest in terms of the prevalence of its negative impact: it was pointed out in April 2020 and in July 2021 by only 17% of enterprises. Note that against this background, according to the IEP, the lack of stocks of finished products in the industry has been persisting for a year, and by the end of summer the enterprises confidently got rid of surplus stocks, the maximum of which fell on the pre-crisis March 2020. “It is possible that the unusual nature of the virus crisis also influenced the rapid revision of reserves estimates - the industry, in the face of a lockdown and logistical problems, could well recall the popular wisdom“ the stock doesn’t pull your pocket ”. The reluctance of enterprises to bring their stocks of finished products to a manageable surplus in the face of obvious growth and demand, and output speaks of the uncertainty of the industry in the imminent end of the crisis, ”explains Mr. Tsukhlo.

All other consequences of the viral crisis by July 2021 reduced their negative impact or were initially insignificant. Thus, the “reduction in output” underwent the same decline in references as the “decline in domestic demand”, being in fourth place. At the same time, the third place was taken by logistic problems, which can be caused both by bans on transport links, and by attempts to find more profitable suppliers of raw materials and materials, according to the IEP.

The deterioration in the financial condition of enterprises retained the fourth place in the ranking of the consequences of the pandemic. Now 23% of enterprises point to it, although at the beginning of the crisis 49% had such expectations. The curtailment of investment programs occurred by July 2021 in 21% of enterprises, although 50% of respondents were “planned” in April 2020. Note that such problems as bankruptcy, obtaining loans, layoffs and refusal of workers to go to work turned out to be insignificant both at the beginning of the crisis and now.

Source: https://www.kommersant.ru/