Uncertainty has risen in the Russian economy due to the concealment of statistics

When they try to determine what influences the dynamics of economic development, say, of a specific country, they rightly name many different factors: exports, investments, consumer demand, various economic institutions (competition, etc.) … This is correct, because the economy is so multifaceted, that its development is influenced by many factors. But the uncertainty of the economic situation is often undeservedly forgotten. Like, since uncertainty is something to take into account… Meanwhile, the mechanism of its influence on economic behavior should not be underestimated.

Let’s take the everyday level – what people care about, for example, what will happen to prices. This is not always clear. More precisely, it is clear, of course, that prices will rise, but how quickly, for which goods and services in the first place, and how long can this continue? Unclear. This is an example of the economic uncertainty we face all the time.

People are, of course, concerned about what is happening with the ruble. And no matter how much we are told that the ruble to dollar exchange rate should not bother us, because, they say, we receive salaries and pensions in rubles, prices for goods and services are also in rubles, we have long realized that it is indifferent to The exchange rate of the Russian ruble does not work out. And there are good reasons for this. Perhaps the most important of them is that, no matter what dedollarization occurs, if the exchange rate of the ruble falls, this still has a very strong impact on inflation. And when it is not clear what will happen to the ruble exchange rate – whether it will be stable, or will decline sharply, or will rise no less sharply – this affects our consumer behavior. We are beginning to have a hard time understanding what we should do: buy currency or sell it, or maybe not deal with it at all?

I note that business faces the same problems in conditions of increasing uncertainty in the economic situation. Being in uncertainty about what will happen to the exchange rate of the Russian ruble, businesses begin to restrain their entrepreneurial activity. This is rational and understandable behavior: when it is not clear what is happening, investment is slowed down. There is a completely understandable desire to simply wait out such times without any sudden movements. And then what questions can there be for a business about why it allegedly does not show proper entrepreneurial activity?! No questions…

Today, the Russian economy is characterized by a very high level of uncertainty in the economic situation. This problem existed before, but it was not so significant. A good idea of ​​its scale is provided by the results of relevant surveys that Rosstat periodically conducts. Several thousand business executives representing medium and large businesses are surveyed. They are asked to name the factors, or rather, to highlight those from the proposed list, which, in their opinion, most limit production growth. The following set of factors is proposed: deterioration and lack of equipment, a high percentage of commercial credit, an uncertain economic situation, a lack of skilled workers, a high level of taxation, a lack of financial resources, competing imports, insufficient demand in the foreign market and insufficient demand in the domestic market.

And when you look at this list of factors, you’ll immediately remember how often you’ve heard that business loans are very expensive, and somehow you won’t even think that it’s not the loan rate that worries entrepreneurs in the first place. And they are primarily concerned about the uncertainty of the economic situation and the still high level of taxation. In recent years, these two factors have been noted as the most negative, according to the results of Rosstat surveys. High interest rates on loans were also cited by business representatives as a serious negative factor, but still, in terms of importance, it is the uncertainty of the economic situation that is beyond competition.

The significance of the uncertainty factor in the economic situation has increased significantly in 2022. This is understandable: unprecedented sanctions, the depreciation of the ruble, crisis phenomena in the economy… In terms of indicators, according to the results of Rosstat surveys, it looked like this: if in January 2022, the uncertainty of the economic situation was called a significant negative factor affecting business activity 47% of respondents were in the manufacturing industries and 35% from the mining industries, then already in April 2022 these became 61% and 40%, respectively. Today these figures are slightly lower, but they still remain at a high level. Especially when compared with the fact that in 2004, for example, the uncertainty of the economic situation was named as a significant negative factor by only 20% of business managers surveyed by Rosstat (at that time, these surveys did not yet differentiate between manufacturing and extractive industries).

Why did this jump in economic uncertainty occur? Yes, there are obvious things: sanctions, crisis, depreciation of the ruble… But that’s not the only reason. Uncertainty has also increased sharply because, after a significant increase in sanctions pressure on the Russian economy, one of the measures to counter this was the refusal of Russian departments to publish important statistical economic information. Many departments took this step: the Bank of Russia, the Federal Tax Service, the Federal Customs Service, the Ministry of Finance of Russia and others.

Thus, the Bank of Russia suspended the weekly publication of data on the total volume of international reserves, stopped publishing the structure of international reserves, and began to provide data on incoming financial flows monthly rather than weekly. He also suspended the monthly publication of information on foreign trade in goods according to the balance of payments methodology, allowed Russian banks not to disclose data from the main reporting forms under Russian accounting standards, granted all financial organizations the right not to report information about controlling persons…

Such a massive, frontal closure of statistical economic information was then, in the spring of 2022, apparently justified from a geopolitical point of view. But soon enough it became clear that this process also had costs. Which was precisely that what was happening in the economy became even more incomprehensible; there was significantly less information.

Moreover, one should not think that there are no problems with closing the information, since it has not disappeared anywhere, and the responsible ministries and departments still have it, just as they had it before February 2022. In general, those who should know know. This is true, but not only those who manage it should know about what is happening in the economy, but also those who make this very economy – business, employees, you and me.

Quite soon (which can be noted with satisfaction!), individual ministries and departments realized that relaxations were needed in terms of bans on the publication of statistical economic information. The Bank of Russia, for example, after some time resumed weekly publication of data on total reserves. And in the spring of 2023, the Federal Customs Service again began to publish data on foreign trade activity for major goods on a monthly basis. So the reverse process of disclosing information is also underway, but, alas, not so actively.

Since sanctions are not easing, but only intensifying, it is still necessary to take into account the risks when disclosing information, but it is also necessary to take into account the negative costs of not publishing information.

I admit that for a person who is trying to professionally assess what is happening in the economy, the lack of important statistical information is a serious obstacle to making a reasonable judgment about what is happening in it. But I somehow always believed that external economic analytics can be useful for everyone who is interested in what is happening in the country. Thanks to it, the uncertainty of the economic situation could become at least a little less.

Uncertainty cannot be underestimated. Many prominent economists have spoken on this topic: Frank Knight, Nikolai Kondratiev, Nasim Taleb. Smart people, correct assessments… And although the American Knight and our Kondratiev talked about this quite a long time ago, about a century ago, you never cease to be amazed at how relevant this problem is today. Perhaps this is not surprising. The significance of a number of factors that influence the state of uncertainty in the economy is increasing: geopolitics, climate change… There are objectively more “misunderstandings” in such an economy. And at a minimum, it is necessary not to aggravate the problem of economic uncertainty. There should be more open economic information. Business and the population will only thank you for this. And even if they don’t say it out loud, their economic behavior will demonstrate the correctness of the course towards openness of information.