The Russian economy will not keep up with the promises of officials

Expert: “Most financial indicators grow only on paper”

In just a few months, the government has significantly improved its forecasts for the near future of the Russian economy. The new scenario of the Ministry of Economic Development states that the negative effect caused by Western sanctions will not be as painful as it seemed before: GDP will decrease by almost half the expected level, the investment decline will not become a catastrophe, which will allow reaching pre-crisis levels in 2024-2025 the level of key financial indicators.

Independent experts are confident that the economic department is somewhat in a hurry with optimistic conclusions and is devoting twice as much time to the resuscitation of the Russian economy.

According to government analysts, the country managed to avoid the sharp collapse of the economy, which was predicted this spring. “The trajectory of the recession turned out to be smoother, which allows us to adapt to the ongoing changes,” the new version of the forecast says.

In the spring, the Ministry of Economic Development predicted that the decline in Russia’s GDP in 2022 would be 7.8%. The agency has now lowered its estimate of the fall to 4.2%. According to the calculations of the Ministry, the Russian economy will reach its pre-crisis level at the end of 2025, but already in 2024, domestic GDP will add about 3.7%.

According to the candidate of economic sciences, financial analyst Mikhail Belyaev, declaring at first more alarming forecasts, and then smoothing out indicators that resonate with society, officials first of all neutralize the psychological effect of possible negative economic circumstances that our country and its population will have to face in the future.

The relevant departments are gradually preparing citizens for the worst-case scenario, although there are factors that can inspire greater optimism about the future financial situation in the country. In particular, the revenues of the commodity sector, on which the national treasury relies, will continue to remain stable. Although daily exports of Russian crude oil and oil products from our country fell by 250 thousand barrels to 7.4 million barrels per day in June (which was the lowest level since August 2021), Russia’s export earnings increased by $ 700 in the same month million to $20.5 billion, up 40% from last year’s average.

“If operating profits from the sale of oil and gas are growing, then Russia simply needs to take advantage of the favorable market conditions. Our country’s revenues from the export of hydrocarbons are growing, despite the reduction in physical supplies, ”the expert notes.

According to Belyaev, due to the faster recovery from the crisis, the Russian economy can also count on an improvement in the investment activity of the private sector. “Although loans from state financial organizations at first will not always ensure the profitability of borrowers, nevertheless, entrepreneurs will receive stable financial support that stimulates support for their activities in the future,” the analyst believes.

However, the Russians also have no reason to hope for the accomplishment of rapid economic exploits. Despite predictions of a slowdown in the economy from 7.8% to 4.2%, the recession remains a recession. Such negative dynamics, as Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences, says, is not the first time that we have observed in the 21st century. Globally comparable falls were noted in 2008, during the global economic crisis, in 2015, when Russia faced increased sanctions pressure from the West, and in 2020, at the height of the coronavirus epidemic. However, at that time, the domestic economy spent no more than a year to overcome the crisis, while now state forecasters allocate at least two to three years to reach the pre-crisis level.

“Most economic indicators are growing exclusively on paper or at the expense of state reserves accumulated in past years. Thus, in 2023-2024, the real disposable income of the population, according to the Ministry of Economic Development, will increase by 1.2-3.5%. But how to achieve growth in people’s incomes if macroeconomic indicators continue to fall? Nikolaev asks. – Exclusively through government subsidies – unscheduled increases in pensions and other preferential payments. Possible social discontent due to such measures will, of course, be suppressed, but it is not a fact that the state will have funds for such “gifts” to its citizens against the background of the recession.”

Published in the newspaper “Moskovsky Komsomolets” No. 28849 dated August 18, 2022

Newspaper headline:
Crisis under the sauce of optimism