Analysts discovered an abnormal increase in bank deposits after the start of a special operation in Ukraine

Analysts from the Institute of Emerging Economies of the Finnish Central Bank discovered an abnormal increase in bank deposits in the regional statistics of the Bank of Russia after the start of the Russian military operation in Ukraine. It is more visible in poor regions and is associated by the authors of the study with a significant increase in payments to mobilized and contract soldiers. Although testing this hypothesis is impossible due to secrecy, the work of Finnish economists may indicate potential problems for such regional economies – from accelerating consumer inflation, especially in the services sector, amid rising war revenues, to slowing industrial development due to worsening labor shortages. However, the authors were unable to confirm the last hypothesis – industrial production in the group of regions with high deposit growth since the beginning of 2022 has grown faster, and not slower than the average in the Russian Federation.

The Institute for Emerging Economies of the Central Bank of Finland (BOFIT), which has been studying various economic aspects of the Russian military operation in Ukraine since the beginning of the Russian military operation, has published a new study on regional characteristics of contract military recruitment. The work is based on the abnormal growth of bank deposits found in the statistics of the Bank of Russia – it is more pronounced in the poor regions of the Russian Federation and, according to the authors, is associated with the receipt of payments to the military (contract soldiers and mobilized) and their families. With reference to official statements from the Kremlin, the authors estimate the number of mobilized, “contract soldiers” and civilian personnel whose work is related to the conflict at 1 million people, emphasizing that this is a lower estimate; the payments themselves – from 195 thousand rubles. per month – significantly higher than the average salary in the Russian Federation (62 thousand rubles), and their mandatory transfers to Mir cards make them noticeable in the statistics of the banking sector.

The purpose of the work is to test the assumption that recruitment for military service in the Russian Federation was largely concentrated in poor and remote regions from Moscow, including for reasons of greater attractiveness of military service there. However, it should also be taken into account that in such regions the growth in receipts of “military” income on deposits is obviously more noticeable against the backdrop of a low base, and the overall picture is clouded by both the unity of the Russian banking system and the “noisiness” of the data. However, the annual increase in household deposits in certain constituent entities of the Russian Federation after the start of the military operation was 30–50% (these are Tuva, Buryatia, Chechnya, Adygea, Altai Territory, Altai Republic, Yamalo-Nenets and Khanty-Mansiysk districts and Transbaikalia) with an average RF indicator below 20%, according to the authors’ calculations, fits into the initial assumption.

The interest in the work, however, is not so much the unverifiable data on the distribution of regional participation in a military operation due to secrecy, but rather the secondary effects of a noticeable influx of “contract” funds into individual constituent entities of the Russian Federation. They obviously exist: for example, if before February 2022 the correlation between the growth of average salaries by region and the volume of bank deposits was uniform throughout the Russian Federation (0.27), then in the group of “regular” regions it increased to 0.29, and in subjects with a “deposit boom,” the connection between one and the other was lost (–0.03), reducing the average indicator for the Russian Federation by half, to 0.12. Researchers found a similar effect in the dynamics of retail turnover (with noticeable spikes after February 2022 in the regions under consideration). However, the influx of payments no longer has any noticeable impact on regional macroeconomic indicators. Thus, the researchers were unable to detect the supposed connection between regional industrial production and the outflow of workers to military service: in this group of constituent entities of the Russian Federation, output is very volatile, but from the spring of 2022 to the spring of 2023 it grew at a faster pace than the Russian average.

Oleg Sapozhkov