Significant economic growth improved the regional government’s budget situation in 2010. However, the regional economy still continues to struggle with the consequences of the financial crisis. Industrial production in the region in 2010 increased only 2,3 percent, which is among the weakest results in the whole country, especially when taking into account the major setback of the regional industry in 2009.
The Barents Monitoring report is written by the Barents Information Centre in Arkhangelsk, a branch office of the Norwegian Barents Secretariat.
The regional industrial production index growth of only 2,3 percent is far behind the federal average of 8,2 percent. In the Russian Northwest federal district only the Komi Republic had a lower result in 2010 – minus 0,3 percent.
As described in another new Barents Monitoring report, the industrial production growth in neighboring Murmansk Oblast amounted to four percent.
Read also: Murmansk struggling with economy
The industrial production level is reflected also in regional investments, which in 2010 remained almost unchanged from 2009, a year when the region experienced a more than 50% investment drop. Some positive signs can still be traced in the level of foreign investments, which increased by 22 percent in the course of the year. However, 3/4 of these investments were made in the Nenets AO.
Growth sectors
Meanwhile, a quite opposite trend was observed in the regional processing industry, which in 2010 saw a production growth of 17 percent. The most significant growth was seen in the timber sector, including the pulp and paper industry. Wood manufacturing increased by 5,5% and the pulp and paper industry added 7,4 percent to last year’s level.
Also the construction industry is doing better. Being the sector which was hit hardest by the financial crisis, the industry is now recovering. Starting from the second quarter of the year, the construction sector enjoyed a sustainable growth which reached almost 10 percent by the end of the year. The last three months of 2010 brought 25 percent of growth in the construction industry compared to the previous year’s level, the monitoring report reads.
However, even this positive dynamics has not allowed the industry to reach the level of the years 2006-2008, when the records demonstrated by the industry were record-high. In 2010, the regional construction industry produced only 3/4 of the amount of square meters made in 2008 and only slightly more than in 2005. Meanwhile, the volume of housing construction is moving faster and has already exceeded the record levels reached in 2008.
Political consequences
Altogether, Arkhangelsk Oblast in 2010 experienced solid economic growth, something which significantly improved the situation in the regional budget. The revenues of the regional budget grew by almost 50 percent.
According to the report, this trend has important political implications. The power of current governor Ilia Filippovich Mikhalchuk expires in less than in a year and his future career is expected to be decided by federal authortities in the near future. In addition to the 2011 State Duma elections and the 2012 presidential elections, Arkhangelsk will also go to the polls in mayoral elections due 2012. Under these stress conditions the regional authorities will be extremely interested in a proper execution of their social obligations and of the preservation of social and economic stability, the reports argues.
Despite a 0,8 percent decline in the regional population, Arkhangelsk Oblast remains the biggest in the Russian part of the Barents Region. By 1 January 2011 the region had a population of 1,225 million.
