The national Statistics Service published a report on the macro-economic situation for January-April, which shows that it is a long time that the sector of construction cannot revive and go out of crisis.
The most interesting and noteworthy fact is not the recession, but the attention of the government and experts to this issue and their imitation that everything is fine and there are no problems in the sector of construction.
According to this report, during January-April the capacity of construction amounted to 61.3 billion drams, which is less by 5.2% than the rates of the same period during the previous year. We can understand the silence of the government. Since the economic indicators of the construction sectors started falling in 2009 the government is telling us to look at the composition of this economy from another point of view. What they are saying is that in case of growth of production and slump in the construction sector the structure of the economy is changing, thus the vulnerable sector of construction stops being the driving vehicle of the economy.
It is wrong to look at things like that because if something is getting better because another thing is getting worse, that can’t help. Herein we will try to understand how is the sector of construction connected with the other sectors of the economy and what influence it may have on the entire situation. The final report for January-April has not been published yet, thus we will focus on January-March. During these three months the sector of construction slumped by 5.5% compared to the same period of the previous year. The capacity of construction works in that period amounted to 40.1 billion drams.
The reason of the slump is mostly the reduction in the construction projects sponsored by state support and benevolent organizations. The amount of construction works sponsored by benevolent organizations was 1.1 billion drams, which is less by 5.5 than the capacity of the previous year. For example, the capacity of construction works implemented with the funds of Panarmenia fund was cut down almost twice. The capacity of construction works sponsored by the state was cut down by 0.4%. Even though the major part of construction works have been done by private companies and people, those investments were not large enough to keep the level of construction works at a high rate.
In other sectors there have been changes as well. For example, in the sector of reproduction of materials the capacity of works has reduced by more than three times and does not exceed 1 billion drams. However, in the mining sector the capacity of works has grown by 2.6 times and amounted to 3.2 billion drams. The highest growth was observed in the sector of financial operations and insurance, where the capacity of construction works during the first three months grew by 5.6 times and covered 17.3% of the entire capacity.
Now we will try to understand what was the impact of the sector of construction on the other sectors. The capacity of concrete production slumped by 6.5%, and the tuff stone cutting and sales – by 45%, cement – by 20.9%, aluminum and other types of doors and windows production – by 31.9%, and the capacity of non-mining construction materials slumped by 30%. Instead of this, the capacity of plaster production grew by 46%, which may mean that instead of doing major construction works people have started doing minor reconstruction works in their premises.
It may seem that these are simply figures, but behind these figures there are destinies of people. These are the people and families that were earning in construction. According to the official information of the national statistics service, the number of employed workers in the sector of construction in 2008 was more than 105,000, but in 2011 this number went down to 67,000. During four years 37.700 (35.8%) people were left out of the construction business. There has been no such massive slump in any of the other sectors. The other sectors have gone down too, thus the people that left the sector of construction have not been involved in the other sectors either. The number of people involved in agriculture only grew by 12,000. Maybe these were the people that had to quit with construction. The number of people in the finance and public administration sectors has grown, however definitely they did not hire these people from those 25,000 workers that had to quit with the construction sector.
We do not have the information for 2012, but based on the tendency that we have been observing, we may assume that the number of people involved in construction should have reduced more.
The statistics above can be connected with emigration. The slump in the construction sector during the past four years has forced dozens of thousands people out of the labor market. The people that were doing construction had to look for job opportunities in the Russian market as this is the easiest and most attractable market for construction workers. Later they take their families with them as well.
In a word, despite the assurances of the government that the slump in the construction sector is a change of the composition of the economy, it is not really like that. In other words, fewer people are building houses, more people are doing insurance and working in the government.