Low Consumer Demand Seen Pushing Down Share of Small and Mid-Sized Businesses in Russia

Paul Goble

            Staunton, January 27 – The share of small and mid-sized business is contracting, Rosstat reports, falling from 22 percent of GDP in 2017 to 20.2 percent in 2018, the last year for which figures are available, even though Vladimir Putin’s national project in this area assumes that they still form 22 percent and will grow to 32.5 percent in 2025 (iarex.ru/news/73550.html).

            The Meister telegram channel suggests that the decline reflects low consumer demand which affects this sector more than others and the government’s almost exclusive focus on big corporations, leaving these smaller firms to shift for themselves with little support (t.me/maester/1068).

            In reporting both the Rosstat data and the Meister telegram channel comment, the editors of the Rex news agency say that one should be cautious about such statistics because Moscow conducts a real census of such businesses only once every five years and then uses a sample poll to predict changes in the interim.

            The editors also note that some of the change in the size of small and mid-sized businesses reflects changes in the way in which units are counted in the agricultural sector. Some agricultural small businesses disappeared when the government allowed rural residents to reclassify their holdings as personal gardens.

            Nonetheless, it is almost certain that the depressed state of the Russian economy means that Russians have less money to spend and that hits the small and mid-sized firms far harder because they are typically far more dependent on such domestic demand than on government purchases or foreign sales.