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Industry,total

99.9

92.0

82.0

85.9

79.1

96.7

94.5

Electricpower

102.0

100.3

95.3

95.3

91.2

96.8

98.4

Fuelindustry

96.7

94.0

93.0

88.4

89.8

99.2

97.3

Ferrousmetallurgy

98.1

92.6

83.6

83.4

82.7

109.6

95.5

Non-ferrousmetallurgy

97.6

91.3

74.6

85.9

91.1

102.8

94.6

Chemical andpetrochemical industries

97.8

93.7

78.3

78.5

75.5

107.6


89.0

Mechanical engineeringand metal working


101.1


90.0


85.1


84.4


69.2


90.9


88.9

Forestry, woodprocessing, and cellulose-paper industries


98.8


91.0


85.4


81.3


69.5


99.3


77.7

Construction materialsindustry

99.1

97.6

79.6

84.0

72.7

92.0

74.7

Lightindustry

99.9

91.0

70.0

77.0

54.0

69.8

72.4

Foodindustry

100.4

90.5

83.6

91.0

82.5

91.8

90.8

Source: Russian Goscomstat

The production recession has affected all thebranches of industry; at the same time, the degrees of the recession differ byindustries. The highest production levels remain in the fuel and power complex.In the electric power production, the production level of 1996 was 80.7% ofthat of 1989; the relevant figure for the fuel production is 64.8% (seeFig.а2.6). This can be explained, first of all, by the relatively high domesticdemand for the electric power. This is conditioned by the followingfactors:

- first of all, the levels of powerconsumption reached in the non-production sphere (it consumes up to one fourthof all the electric power) remain the same;

- second, the production drop in the highpower consumption industries (metallurgy) compared with the lower powerconsumption industries (mechanical engineering, light industry) wasminor;

- third, the efficiency of use of the powerresources dropped due to the reduced load on the production capacities andsuspensions of production;

- fourth, the technology restructuration ofthe production is extremely slow due to the abrupt reduction of the productioninvestments; and

- fifth, all these are linked with theexistence of the twilight economy; the power production for its needs isaccounted for by the official statistics, while its products and services arenot.

The conservation of the relatively highproduction levels in the fuel industry is also explained by the relatively highexport capacities of the oil and gas producing sectors. In 1996, the volumes ofexport were 41.7% of the production for the oil industry and 32.7% for the gasindustry.

Table 2.6

Dynamics of physical volume of industrialproduction in 1996
(% of January 1990, seasonalcharacter eliminated)

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Industry,total

46.0

45.8

45.6

45.4

45.1

44.9

44.6

44.4

44.1

43.8

43.4

42.9

Fuel and powercomplex

68.3

68.6

68.7

68.4

68.0

67.5

67.1

66.9

66.7

66.3

65.4

64.2

Ferrousmetallurgy

54.2

53.8

53.6

53.4

53.2

52.9

52.9

53.1

53.3

53.2

52.9

52.7

Non-ferrousmetallurgy

82.9

82.9

83.0

82.9

82.7

82.4

82.2

82.4

83.0

83.9

84.7

85.5

Mechanicalengineering

30.5

30.7

30.7

30.5

30.5

30.8

31.0

31.0

31.1

31.1

31.0

30.5

Chemical andpetrochemical industries

42.1

41.0

40.3

40.3

40.5

40.9

41.3

41.6

41.9

42.0

42.2

43.1

Forestry, woodworking, and cellulose-paper industries

36.2

35.1

33.9

32.4

30.8

29.9

30.1

31.0

32.0

32.1

30.9

28.0

Construction materialsindustry

32.4

31.5

30.8

30.2

29.6

28.9

28.4

27.8

27.2

26.4

25.8

25.7

Lightindustry

13.6

13.3

13.3

13.3

13.1

13.0

12.9

12.7

12.4

12.0

11.6

11.5

Foodindustry

40.9

40.7

40.6

40.7

40.8

40.5

39.3

37.7

36.2

35.3

35.0

35.0

Source: Center for economic conjunctureunder the RF Government

Due to the relative stabilization of thedomestic demand for power and a certain growth of the power resources export,the production drop rates in the fuel and power complex were the least,compared with the other branches. The aggregate production of the complexreduced by 2.1% compared with the preceding year. At the same time, theelectric power production reduced by 1.6%, the oil extraction reduced by 2%,and the coal mining reduced by 6%. For the first time during the years ofreforms, the natural gas extraction grew (by 1%) which is, as we believe, theindicator of the gas extraction industry transition from the production dropstage resulted from the drop of the domestic power consumption andreduction of the effective demand of the CIS countries, to the growthstage.

As we believe, during the last two years, theindexes of development of the crude oil extracting have shown an obvious trendtowards stabilization. This allows to suppose the formation, on a lower thanthe pre-crisis level, of a new, relatively stable balance between the crude oiloffer, for the one hand, and the domestic and foreign demand for it, for theother hand. The formation of such balance allows to count on the keeping, inthe nearest years, of the trend towards stabilization in the oil extraction.Moreover, one should expect that the possible additional reduction of thedomestic demand for crude oil will be cby the expansion of its export. As oftoday, the stable production growth is observed only for the group of jointventures. In 1996, joint ventures expanded the crude oil extraction by 16%,while their specific share in the total crude oil extraction in Russia reached5.2%.

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