MIL OSI Translation. Region: Russian Federation –
The economy can develop extensively or intensively, but both options depend on quantitative and qualitative factors. Read the mos.ru article for what this means in simple terms.
Why determine the rate of economic growth? What are they like? We continue the series of publications “Moscow Economy in Simple Language”. This time we are talking about the rates of economic growth and their impact on the inhabitants of the country and each region.
The main task of the economy
The growth rate of the economy is determined by the total income of the state, or gross domestic product (GDP). If the GDP grows, then the economy grows too. Gross Domestic Product is the total value of all goods and services that are produced domestically in one year. Economists are counting both buckwheat and new technologies, performances and bank loans.
The higher the GDP, the better for the economy of the state and its citizens. You can find out the average standard of living in a country by calculating GDP per capita. This will not give a complete picture, but it will reflect changes in the well-being of the population. If you are interested in a specific subject of the Russian Federation, then you can measure the gross regional product (GRP). This is also the cost of all goods and services, but already produced in a specific region.
You can read about how GDP is calculated, how it differs from GRP and why these indicators are needed at all. here.
Economic growth, like GDP and GRP growth, is one of the main economic tasks of any region or country. These dynamics reflect how the production of goods and services is growing.
In depth and breadth: how the economy can grow
The economy of a country or region can develop extensively or intensively. Extensive growth is based on an increase in the used economic resources. For example, if the main budget income comes from the extraction of natural resources, then extensive growth means an increase in the volume and rate of their extraction.
Intensive growth is the improvement of technologies, the development of science and technology and the application of their achievements in production, the development of education and the training of more qualified personnel. Or, in other words, the growth of labor productivity.
The rate of economic growth is influenced by many factors – quantitative and qualitative. These are natural and labor resources, capital efficiency, geography, technology and management efficiency. Theorists argue which factors are the main and which are secondary for the growth of the economy. Many believe that their combination and a healthy balance are important.
What does inflation have to do with it?
Inflation is also important for a good rate of economic growth. If it is stable and predictable, then investments become long-term, focused on the future. If money quickly depreciates, then investors try to spend their earnings faster. Investing in long-term development becomes unprofitable due to the unpredictable market situation. And for the development of some sectors of the economy, such as science, technology and innovative industries, it may take a long time.
In the capital, inflation remains low, despite difficulties due to the coronavirus pandemic. For nine months of 2020, inflation in the city amounted to 102.5 percent to data of December 2019… This is the lowest figure in the last 30 years. The average annual inflation rate has also decreased – from 7.2 percent in 2010-2013 to 4.2 percent in 2016-2019.
Economic growth directly affects the standard of living of the population. If the economy is thriving (as indicated by growth rates), then wages, comfort and security, and social opportunities will rise. This can be seen even in the example of a specific employer. If the business is doing well, then it can afford to pay bonuses to employees and provide other bonuses, such as additional insurance programs or the opportunity to send a child to a corporate kindergarten.
The better the economy feels, the more money goes to the budget. This means that the government can allocate more funds for social needs – quality medical care, good and affordable education. A developed economy makes it possible to invest in road construction, city improvement and improvement of the residents’ comfort.
And how is it in Moscow?
Let’s analyze the rate of economic growth using the example of Moscow. The main indicator for the capital is the GRP; it characterizes the rate of development of the urban economy. Over the past eight years, this indicator has grown in comparable prices by 11.2 percent and amounted to almost 18 trillion rubles. This is about 1.4 million rubles per capita. In total, the capital accounts for a fifth of the country’s total GDP.
In 2020, even the coronavirus pandemic could not shake the capital’s economy. Already at the end of summer, the first news about the recovery of various sectors – manufacturing and construction, services and trade – appeared. At this time, restrictions were still in force in the largest cities in Europe. This has seriously affected both business and the regional economy. In Moscow, restrictions were introduced and removed gradually and carefully, which makes it possible to count on a quick economic recovery in 2021.
So, in January 2021, the total turnover of trade and service enterprises amounted to 920 billion rubles. This is 9.3 percent higher than the same period last year. The positive dynamics continued in February as well. For example, the turnover of non-food trade increased by 37.2 percent (for February 15-21, 2021, compared to the same period last year).
At the same time, the attendance of shopping centers fell by about 30 percent. This indicates an increase in online sales in Moscow. In general, the e-commerce sector began to develop more actively during the pandemic. Entrepreneurs digitized their offerings, which made it possible to maintain the overall turnover even during the period of strict restrictions.
Economy 2020. How Moscow is coping with the pandemic Moscow maintains investment grade credit rating Manufacturing industry in Moscow expands production capacity Production of medicines, food products and machinery increased in Moscow
Also during the pandemic, the pharmaceutical industry and chemical production developed dynamically. Many enterprises were able to reorient themselves to new needs and quickly set up the production of sanitizers, disinfectants and personal protective equipment.
The concessional mortgage program set the pace for the development of the real estate and construction sector. Moscow has become a leader here as well. As of mid-February 2021, residents of the capital received more than 56 thousand concessional loans (14.5 percent of all loans issued in the country) in the amount of about 314 billion rubles (27.4 percent of the total). At the same time, the total area of residential buildings built in Moscow is almost five million square meters (96.2 percent of the 2019 level).
Social and infrastructure projects were not suspended in the capital, they continued to invest in innovative production, and in some industries even salaries increased… All this speaks of a stable and developed economy, ready for the challenges of the modern world. International experts confirm that the investment level of Moscow is still assessed as stable… Economists are confident that in 2021 Moscow’s economy will grow faster than the national average.
EDITOR’S NOTE: This article is a translation. Apologies should the grammar and or sentence structure not be perfect.