What did the government of Mikhail Mishustin do during the four years of its existence?

The government of Prime Minister Mikhail Mishustin this week marks the fourth year of its existence. In circumstances where it would be difficult to expect anything more from the executive branch than a prompt solution to new problems, the year looks unusual: most of the indicators for 2023 do not look “war-like” in any sense, and the most important of them is investments growing at an increased rate at a pace contrary to all previous forecasts.

The government of Mikhail Mishustin began work four years ago – after being formed on January 16–21, 2020. The executive branch spent all four years in unique circumstances of external and internal shocks: a pandemic, followed by the Russian military operation in Ukraine and sanctions of the G7 countries, which had no analogues in history either in sectoral coverage or in severity. In 2022, the macrostatistics of the Russian Federation, which largely characterizes the effectiveness of the federal executive power, could be considered the result of the inertia of economic development in previous years and a fairly successful passage of the peak of “pandemic” uncertainty. In 2023, strong short-term negative trends should have already spoiled all macro indicators, but, in essence, the statistics associated with the activities of the White House, which implements in practice and in coordination with the other branches of government the tasks set by the president, looks like these four years were planned and did not contain any shocks.

The point is not so much in the dynamics of GDP, which grew by 4.7% from 2020 to 2023 with the strongest sanctions turbulence in foreign trade and a radical restructuring of the entire export strategy of the Russian Federation, although in this case the growth approximately corresponded to the potential determined by the Central Bank of 1.5–2 % of GDP per year without strong distortions towards consumption or production. Rosstat data also show a completely successful joint fight between the Central Bank and the executive branch – the government and its presidential branch – against inflation: its peak, 17.8%, occurred in April 2022, and 2023 ended with inflation at 7.4%. The main “social” result of 2023, which characterizes the situation for the working population, refuted all forecasts: the growth of cash income in real terms amounted to almost 5% – in many ways, the feeling of the absence of strong threats to households and the population of the Russian Federation is ensured by this.

The most interesting thing is the maintenance of high rates of investment – they increased by 22.7% at the end of the year and grew in both the private and public sectors. In statistical data, it is quite difficult to detect the quite reasonably expected “militarization” of the Russian economy, and in the “overheating” of the economy noted by the Central Bank and the White House in 2023 (GDP growth above potential with the generation of additional inflation), the military-industrial complex plays a significant but limited role: de -in fact, this is not a “transition to war footing.” It is difficult to say what trajectory economic growth in the Russian Federation would have had in 2021–2023 without the SBO, but most likely it would not have been radically higher – partly because there was no need to stimulate the work of large companies – in 2022 the White House allocated this is 2 trillion rubles, that is, more than 1.5% of GDP; in 2023, the scale of support was significantly less – 0.9 trillion rubles, closer to 0.7% of GDP, and, accordingly, growth would hardly have accelerated above potential .

In practice, of course, the mechanics of maintaining investments at a high level are much more complicated than pure stimulation – both state infrastructure investments (including those provided by the National Welfare Fund) played a role in it, and the inability for a significant part of Russian business, whose owners became objects of personal sanctions, to invest in projects in jurisdictions that have become “unfriendly” in the definitions of the 2022 presidential decrees, and restrictions of the Central Bank and the Ministry of Finance on cross-border capital flows. A real-estate development incentive program also supported capital investment, but the mortgage boom was only partly the result of White House subsidies to real estate developers: in fact, it was the result of years of transformation in the construction and financial sectors. Finally, a significant part of the investments in 2023 are investments in the infrastructure of markets abandoned by Western companies due to the risks of sanctions and capital restrictions, as well as investments in new logistics and infrastructure associated with the collapse of foreign trade with the EU and the growth of imports from Asian countries, in primarily China.

Nevertheless, the result is obvious: in 2017–2019, the strategies of private investors in the Russian Federation were very conservative, but the average investment activity figures for these years and the last three can easily be confused. Almost all industry statistics (except for processing, where, however, the macro situation looks even better due to the circumstances of the Northern Military District – mainly due to the growth of military orders) looks in the future for three years and with a strong improvement in indicators in 2023, just as in plans beginning of 2021. The record results of the agricultural market in 2022 were a surprise, but 2023 was not far behind them in most indicators: the situation in crop production is stable, and in livestock farming there is planned growth. Moreover, the most “non-military” and easily moving investment plans, the road construction industry continued to grow at record levels during these four years. Finally, the social sphere practically did not notice the shocks, and the upcoming adjustment of national projects in 2024 is unlikely to change anything much.

Structural changes in the economy – in transport, where sectoral flows have changed greatly, in tourism, which has become largely domestic, in science, where the nature of ties with foreign scientific centers is changing dramatically – at least for now, they are leading not to recession, but to growth. And finally, an unusual result of the fourth year of the government’s work was a very noticeable development of the service sector, which was facilitated by self-employment programs, active support of VEB.RF for small and medium-sized businesses, as well as the rapid digitalization of retail – it was given impetus by the previously made huge efforts of the government of Mikhail Mishustin in the digitalization of public administration . In these industries in 2023, as a result, there are also no symptoms of recession, although, like all sectors of the Russian economy, they now suffer from the most unusual circumstance of the work of the “cabinet under constant shocks” – unemployment, which has fallen below 3% according to the ILO and in large cities are well below the calculated optimum. Severe staffing shortages are likely to contribute to some economic slowdown in 2024, along with the medium-term effects of sanctions, and that could make this year more challenging for the White House. Nevertheless, it is highly likely that this will not be noticeable in the numbers – 2023 demonstrated this convincingly.

Department of Economics