Sources of business activity growth in the Russian regions during the external shocks

S. Zemtsov
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S. Zemtsov: Russian Presidential Academy of National Economy and Public Administration (RANEPA), Centre for economic geography and regional studies at RANEPA, Moscow, Russia

Journal of the New Economic Association, 2025, vol. 66, issue 1, 291-300

Abstract: The external shocks of 2022-2024 had an ambiguous impact on business activity - dynamics of the number of small and medium-sized businesses (SMEs). The SME sector quickly responds to changes, while contributing to economic adaptation. Only eleven Russian regions have not overcome the decline in business activity, i. e. the number of SMEs in 2024 is less than in 2021: Vologda, Sakhalin, Arkhangelsk, Pskov, Bryansk, Kursk, Tambov, Orel regions, Crimea and Komi Republics and Sevastopol. The article uses econometric means to identify the factors that influenced these dynamics. The resilience of entrepreneurial ecosystems is higher in regions with diversified foreign trade relations, for example, in Moscow, Orenburg, Zabaykalsky and Krasnodar regions. On the contrary, businesses with intensive economic ties with countries that introduced trade sanctions suffered more due to supply disruptions and restricted access to markets, in Sakhalin, Kursk, Arkhangelsk, Orel regions and Komi Republic. Developed entrepreneurial ecosystems in Moscow city, Moscow, and Leningrad regions were able to benefit from the departure of foreign companies from Russia due to emergence of market niches. The concentration of SMEs in them has increased, accounting for 42% of the total growth in Russia. Growth is noticeable in regions with favourable business climate, for example, in Tyumen region and Tatarstan. An increase in household incomes and, accordingly, demand for SMEs' goods and services, including tourism and entertainment, played a major role in maintaining business activity in 2022 and its growing in 2023. The budgetary impulse had a similar effect due to increased funding for government projects, investment growth and indirect support for SMEs, including allowing of parallel imports. The spread of marketplaces contributed to the conjugation of growing demand and the increasing number of online businesses. The introduction of sanctions against the largest enterprises did not have a noticeable impact on the SME sector due to growing government orders. In general, the share of regions in the number of SMEs decreased near the European Union and Ukraine, as well as in some regions in Siberia and the Far East and increased in the North Caucasus and in the capital agglomeration. This could have long-term consequences for regional development and requires additional economic policy measures.

Keywords: sanctions; resilience; Russian regions; small and medium-sized businesses; exit of foreign companies; public policy; budget impulse (search for similar items in EconPapers)
JEL-codes: R11 R58 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2025:i:66:p:291-300

DOI: 10.31737/22212264_2025_1_291-300

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