Business exhibits modest optimism
Small and Medium-Sized Enterprises (SMEs) in Russia showed a mix of optimism and caution in August 2021, according to the latest Index of Business Activity of SMEs (RSBI). The RSBI, which measures business activity, increased slightly from 50 points in July to 50.4 points in August, indicating a marginal increase in business activity.
However, the share of SME representatives with a positive outlook on investments is at its lowest since the end of 2018. The share of loan approvals among applicants increased from 51% to 68%, but the share of SME representatives planning to increase their investments decreased to 16%, the lowest figure since the end of 2018. The share of SME representatives planning to reduce investments increased by 4 points to 10%, the highest since mid-2021.
The lending component of the overall index was boosted by the central bank's process of lowering interest rates. VTB Bank and Sberbank played significant roles in increasing the credit activity index for SMEs in August, with credit activity reaching a yearly high of 59 points.
Despite the increase in credit activity, the sales component of SMEs remains in a deep decline, at the lowest level in two years. The share of respondents with a pessimistic outlook on sales exceeded those with a positive outlook for the first time this year.
Representatives of the small and medium-sized business sector are currently giving cautious assessments of business conditions for the near future. Satisfaction with the labor situation remains at historical lows, with a score of 49.1 points. The Index of Business Activity for medium-sized businesses decreased in August, reaching 51.2 points.
On the positive side, there was a slight increase in the micro and small business segments, reaching 48 and 53 points respectively. The RSBI index decreased only for medium-sized businesses in August.
In conclusion, while there are signs of improvement in credit activity, the overall outlook for SMEs in Russia remains cautious, with concerns about the current economic situation, high credit rates, and a declining sales component. SME representatives are giving cautious assessments of business conditions for the near future.
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