how 2023 changed the attitude of business and government to forecasts

Forecasts are an essential and very common part of the development of any business. However, to build them, we need models, an understanding of patterns, and the interconnection of events and processes. And these models were completely destroyed in February 2022. As a result, the first year of the Russian-Ukrainian conflict was filled with forecasts of varying degrees of plausibility, and 2023, in theory, was supposed to be the control year. But the models were clearly tested poorly, it is still extremely difficult for market participants to predict the development of the situation, and the basic horizon for adequate planning has narrowed to a year at best.

The fact that all possible forecasts and expectations were mixed up and turned upside down in 2022 did not surprise anyone at all. After all, there has not been a military conflict of this scale on the borders of Europe for more than eighty years. But most analysts and market participants expected at least some certainty from 2023. Adequate answers. Understanding new rules and models for forecasting. Did not work out. And this is a trend without a clear direction – the reality turned out to be both worse and better than expectations.

For example, according to forecast Eurasian Development Bank (EDB) from November 2022, inflation in Russia by the end of 2023 was supposed to slow down to 6% after 12.6% in 2022 (by last December the figure was 11.94%), and the key rate at the end of 2023 year – not to exceed 8%. But in mid-December 2023, inflation, according to the Central Bank, reached 7.48%, and the key rate turned out to be twice as high.

On the other hand, in the field of critical information infrastructure, on the contrary, a year ago, apocalyptic moods reigned: interruptions in communication were expected even among large operators, serious problems with servicing foreign equipment of power plants, and an increase in the accident rate in aviation. But 2023 ended without serious disruptions to communications and power supplies, not to mention plane crashes. As a result, expectations of a total shortage of components for microelectronics (even chips) and high-tech products in general did not come true.

As a result, the previously highly publicized business of forecasting in the Russian economy and business is becoming less and less popular.

Partly due to inertia, such analytics remain in the financial sector – banks still submit reports and even partially publish them, and investors need food for thought to make decisions about purchasing securities. But in general, there is less and less basis for forecasts. Back in 2022, both business and government sharply reduced information disclosure. In 2023, it only became smaller, and regulators began to seriously discuss the closure of even a number of registers that Western opponents could rely on when introducing new sanctions.

How can you plan business development in such conditions? Not for long and not very effective.

Most market players admit that they live “according to the situation” and “today,” even if they formally write certain development strategies for longer than a year. In general, the situation in the economy was very clearly demonstrated by the government’s autumn attempt to issue forecast according to the country’s needs for personnel five years in advance.

The Ministry of Labor began collecting data on the methodology for planning the personnel situation from large Russian employers by sending out relevant questionnaires. As a result, it turned out that in many cases the business planning horizon now does not exceed a year. And this is still a good period, they say in companies; some are even limited to a quarter.

In a situation where new packages of sanctions are issued to Russia at approximately the same quarterly frequency, and on the front line, an offensive is regularly confused with a counter-offensive, this is apparently a justified policy. But in most industries the investment cycle is much longer than a quarter. And thinking about the future and analyzing risks in general is useful, even if it’s boring and seems pointless. Because at some point, wolves may turn out to be not a figment of the imagination, but a reality itself.

Tatiana Isakova