The state of the Russian economy in the year results. Briefly about the main thing: Russian economy—2017

The results of 2016 are almost summed up. According to the official version, Russia has long passed the bottom, the economy is growing confidently, which Rosstat confirms with its November data. Objectively, the picture is different: Russia has entered a long period of stagnation, although some crisis phenomena have been statistically smoothed out, there is no talk of economic growth. 2017 will be a period of prolongation of the inertial development scenario, in which the authorities will adhere to the formula “wait and endure” and use traditional recipes for the anti-crisis program in the best canons of the IMF.

What economic development forecasts were given for Russia for 2017? Forecasts were given from those who echo the authorities that everything in the country is going in the right direction, we are emerging from the crisis. There were also assessments by those who tried to objectively, albeit in a smoothed form, assess the economic situation. Let's look at the forecasts.

OPTION ONE. INERTIAL DEVELOPMENT

According to the economist Jacobsen's Saxo Bank No unexpected turns are expected in the Russian economy. According to him, “nothing has changed here in the last 20 years, so it is very easy to make forecasts on the Russian economy,” there have been no economic reforms, and there are no. All reform plans are limited to talk. According to his forecast, GDP growth will be zero, which, however, will not call into question the re-election of Vladimir Putin for a new term.

According to World Bank forecast from November 2016, in 2017 the Russian economy will grow by 1.5%, provided that oil prices average $55 per barrel, however, despite this relatively positive forecast, the World Bank indicates that “this growth spurt , however, is unlikely to turn the tide in terms of building a more diversified economy.” Sanctions, a reduction in Russia's financial reserves, and the vulnerability of the economy to external shocks will have a negative impact on the economy. However, the bank hopes that growth factors such as investment and consumer demand will resume in 2017.

Forecasts EBRD also showed that by the end of 2017 a change from recession to slight growth is possible. IMF also predicts economic recovery in 2017, but he associates this only with rising oil prices. The expected GDP growth could be 1%. The IMF also takes into account such a growth factor as domestic demand, which, according to the forecast, should begin to recover. But here you need to understand the following factors:

The IMF operates with statistics provided by the Russian statistical service;

The IMF proceeds from its ideologically driven ideas of an economic model that ignores the concept of national interests.

However, the IMF clearly states that despite calls to diversify the economy to accelerate economic growth, this has not happened, so growth is unlikely to be sustainable and will be based on a recovery in oil prices.

Magazine "The Economist" predicted growth of 0.7%. He also noted that structural problems, low levels of investment, and tightening fiscal policy will remain negative factors. All this will hold back GDP growth to 2% in the future. The magazine predicts continued tensions with the West, growing ties with Asia and a lack of economic reforms, although the government will try to improve the efficiency of government. But this has nothing to do with reforms in the economic sphere.

Thus, when making forecasts, world structures speak rather of opportunistic growth due to oil, and completely deny growth due to structural reforms, since the latter remain just beautiful slogans of the president.

OPTION TWO. OFFICIAL

These are economic development scenarios developed by state and para-state structures - the Ministry of Economic Development, the Bank of Russia and others. Their uniqueness lies in the fact that they are variable: usually this is a set of several scenarios, which together can cover all development options. With such forecasting, it is already difficult to make a claim that something went wrong or deviated from the forecast. Among all the scenarios, the average one, which is a continuation of the trends of the past year, is usually taken as the base one.

According to the Central Bank the most likely scenario is one in which there will be no significant fluctuations in the oil market and the price of the energy resource will remain at $40 per barrel. This is the scenario of “adaptation of economic entities to changes in external conditions,” that is, the Central Bank proceeds from the fact that in the new year there will be no structural reforms and transformations, the country will continue to develop inertly. The growth rate will be 0.5–1%, with subsequent growth in the future at 1.5–2%, the inflation rate should be within 4%. But it is worth noting that it is not the first year that the authorities have chosen 4% as a target. The Central Bank plans to soften monetary policy in the new year and reduce lending rates, which will promote both consumer and investment demand. No sharp fluctuations in exchange rates are predicted.

However, in addition to this average forecast, there is a more and less favorable scenario. But in both of them, all calculations are again based on the price of oil. In the negative scenario, when the oil price is $25 per barrel, GDP will fall by 1–1.5%, and at a price of $55, GDP growth could be 1.2–1.7%.

Ministry of Economic Development also presented three forecast options.

The baseline is a scenario of maintaining unchanged external factors and restrained fiscal policy. With it, growth in 2017 will be at the level of 0.6% (base scenario). Inflation will be about 4%, but the greatest contribution to inflation will be made by rising food prices. Industrial production will grow by 1.1%, which will mainly be provided by government orders. The average dollar exchange rate for the year in this scenario will be 67.5 rubles per dollar. For the “base +”, the external situation will be more favorable: the oil price will be at $48 per barrel, GDP growth will be 1.1%. In the target scenario, the bet is on the transition to an investment model of development, which will contribute to economic growth in 2017 by 1.8%. Thus, under any development scenario, the ceiling for GDP growth for 2017 is 2%. The Kremlin does not even think about changing the situation and is content with the fact that the GDP indicator will barely overcome the negative mark.

Speaking about the extent to which these forecasts can be realized, it is worth noting that the January indicators of this year are already better than the forecast values. The dollar exchange rate is now less than 60 rubles per dollar, while the annual average according to basic forecasts will be 67.5. Oil now costs over 55 dollars per barrel, although according to forecasts it is 40. If the forecasts have a small degree of error, then we should soon expect a decrease in the price of oil and a weakening of the ruble. But the most important thing is that regardless of whether the forecasts were given by Western structures or domestic ones, they all proceed from the fact that nothing in the economy will change, the exchange rate will be extended, and there will be no reforms.

FORECAST FROM THE CENTER OF SULAKSHINA

In 2017, the Russian economy will be affected by the same negative factors that have been operating over the past few years:

No reforms or strategy for transforming the country;

Sanctions will remain, restraining the country's economic growth. This will be caused both by non-compliance with the Minsk agreements and by Russia’s military operation in Syria, new sanctions will be caused by Russian hacking activity;

Low oil prices, which, following the example of the 80s, will remain at a limited level for a long time;

The Kremlin will choose a development strategy according to Kudrin, in which the emphasis will be placed not on stimulating the economy, but on containing growth through the austerity regime;

The Central Bank will be busy with ensuring a low level of inflation, trying to bring it to the target value, and cleaning up the banking sector;

The authorities, as in the previous year, will be faced with the acute issue of filling the budget: oil production volumes will decrease, if there is an increase in oil prices, it will be very insignificant, the budget will need new sources of income, which the government expects to receive at the expense of the population.

2017 will be another period of stagnation in the Russian economy, when the idea of ​​transforming the economy will be reduced to a triumphant return to the raw materials model, from which, however, no one has departed. Oil will rise a little, and this will instill optimism in the government, for which reforms are worse than a slow slide into the abyss of a third-rate country, whose economy clearly does not correspond to the size of the state or its potential.

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This publication is an updated version of Andrey Movchan’s work “Briefly about the main things: the Russian economy in the 21st century.”

In the 25 years since the collapse of the USSR, the state of the Russian economy and methods of its transformation have been the subject of a large amount of speculation and superficial judgments both in Russia and abroad. This “war of delusions” was one of the reasons that Russia not only missed 25 years and several unique opportunities for economic and technological breakthrough, but also returned in its political and economic structure to a state close to the beginning of the 20th century. The main problem was the extreme simplification of the view of the status and prospects of the Russian economy, the naivety and primitiveness of most of the approaches to management and analysis of the situation proposed during these years. The real picture has always been much more complex, and it can only be seen by fully understanding the rather complex interweaving of external factors and internal interests.

Features of the Russian economy over the past 25 years

. By the end of the 80s of the 20th century, the USSR economy finally lost control - due to internal imbalance and inflexibility of planned management methods under the socialist property system. At the same time, Russia inherited from the USSR not only huge mineral resources, but also a developed infrastructure and a large volume of inefficient but functioning industrial assets.

After 1991, the system of functioning of the economy changed rapidly, but democratic institutions were not formed.

In the 21st century, Russia has experienced the classic “Dutch disease,” aggravated by the centralization of power and property and the absence of democratic institutions. However, while hydrocarbon prices were high, the country managed to accumulate enough reserves so that today's drop in oil prices and the country's relative international isolation did not cause economic collapse.

All major economic factors and even available management resources today either negatively affect the Russian economy or simply cannot ensure its growth.

Foreign policy factors, primarily sanctions, are secondary, insignificant and do not have a significant negative impact on the economy, despite the fact that the authorities in Russia actively use them as an excuse for economic problems.

Main conclusions and forecasts

. In 2017, one should not expect significant surprises from the Russian economy, either negative or positive. In the basic scenario, neither catastrophic economic nor radical social processes are visible.

The weakest link in the coming years will be the Russian banking sector.

There are other “weak spots” where catastrophic changes can occur.

The Russian government decided to respond to economic challenges not with an attempt to reform the economy, but with a course to maintain the level of the budget deficit in the short term at an acceptable level, including at the expense of the long-term perspective. The measures are mainly aimed at increasing tax revenues and reducing budget obligations. This strategy is only at the beginning of its natural development path: 2017 and 2018 will most likely be marked by a targeted increase in taxes and fees and a gentle reduction in budget spending. But from 2019, tax growth will accelerate, an active increase in domestic public debt and limited emission funding of the budget will begin.

It is very likely that the government will undertake a significant emission program with a parallel closure of cross-border capital movements, restrictions on foreign exchange transactions and price controls. However, this will not happen before the 2018 presidential election and is unlikely to happen until 2022-2024.

The Russian economy is not unique - the “Dutch disease” it experienced has quite typical symptoms and consequences.

Russia is still far from economic collapse and loss of control, but is slowly moving towards them. If catastrophic scenarios associated with management errors or external factors can be avoided, Russia has an economic safety margin for a period of six to ten years or more; then the question will be about the need for urgent decisive changes to preserve the integrity and controllability of the country. However, judging by public sentiment, such changes are likely to include tightening controls, further nationalization, closing economic space and simplifying the economic structure.

INTRODUCTION. CAN YOU TRUST YOUR EYES?

Quantitative assessment of the indicators of the Russian economy depends on the conventionality of the systems for changing various parameters and the accuracy of the data we have. Data before 1991 are generally difficult to consider significant, since statistics from the USSR were formed according to completely different principles from modern ones, measuring in an artificially valued currency and in the economy of regulated prices. After 1991, statistics became more adequate, but significant questions still remained.

The main issue in assessing Russia's GDP has always been the share of the shadow economy, and not only in direct form (unofficially recorded earnings and profits).

In particular, the statistics were greatly distorted by the practice of artificial pricing—inflating prices for government supplies and contracts. For construction contracts, overpricing was and is, according to various sources, from 20 to 50%. For the supply of complex technological and consumer equipment - up to 200% of the real price. The practice of private distortion of prices for imported goods in order to pay lower duties, for services provided in order to reduce VAT, for exported goods in order to reduce revenue and avoid paying income taxes, etc. was also very common.

The share of informal business in Russia in the 1990s, according to some estimates, exceeded the entire size of officially registered businesses. By 2013-2014, this share, according to official data, decreased to 10% of the economy. However, it is unknown how official measurements of informal businesses were taken. But in 2014, Rosstat announced that it had significantly revised its methodology and significantly increased the share of informal business in GDP. Thanks to this, as well as the inclusion of the Crimean economy in the calculation of GDP in 2014, according to official data, it even grew, although by less than one percent.

Indicators such as average household income (in general and by industry or region) are quite difficult to judge for the following reasons.

In Russia, due to prohibitive payroll taxes and taxation of wages and income starting from zero, most payments are disguised as other forms of financial transactions or are made from unaccounted cash. The share of cash turnover in retail trade in 2014 exceeded 80%, 30% of residents did not have bank cards, and the amount of cash rubles in circulation over the past 14 years has grown more than 45 times.

The assessment of average household income and the uniformity of its distribution is also influenced by the fact of mass fictitious employment of citizens.

It is not easy to assess the distribution of budget expenditures in Russia: more than 30% of these expenditures are classified. It is traditionally believed that classified budget items are used to finance the military-industrial complex and other law enforcement agencies. But there is indirect evidence that the range of their use is much wider.

Even reserves created by the government can be difficult to estimate: although their composition is published, many items are opaque, and some (such as money transferred to Vnesheconombank) are highly likely to represent non-performing loans.

The assessment of units of measurement also causes difficulties: for 2000–2015 (see below), the market exchange rate of the US dollar to the ruble fluctuated relative to the calculated inflation rate in the range from approximately 140 to 60%. If Russia’s GDP, for example, for 2013 had been converted into dollars not at the market rate, but at the calculated inflation rate, the amount of 2.1 trillion dollars would have turned into no more than 1.4 trillion. A consistent look at the events of the Russian economy, taking into account such volatility of the ruble relative to its fair value, should rather speak not of a fall in Russia’s GDP in 2015-2016, but of its inadequate overvaluation in 2005-2013 due to the revaluation of the ruble.

A big problem exists in Russia with the application of the purchasing power parity (PPP) coefficient to economic indicators. The problem is not only systemic, but also individual: in Russia, prices for utility services are significantly distorted, the variability of prices for the same goods and services in different regions reaches hundreds of percent, consumer baskets for different segments of the population, due to high stratification, have completely different compositions. Officially accepted PPP levels exceeding 300% are unlikely to adequately reflect comparative price levels in Russia and the United States. Suffice it to remember that more than half of Russians’ consumption is imported, fuel prices in Russia and the United States today are approximately the same, real estate prices are comparable, and for a whole range of consumer products (food, clothing, household items, household appliances, cars, etc.) ) prices in Russia for certain goods are higher than in the USA.

We will have to take into account all these costs of quantitative methods when analyzing the Russian economy. It must be remembered that the results of the analysis will only be as accurate as the data allows.

A GAS STATION IN A BOOM PERIOD: THE RUSSIAN ECONOMY IN 2000-2013

Over the past 15-16 years, the Russian economy has experienced the classic resource cycle and the “Dutch disease” - phenomena that are banal and well studied. By 2000, Russia arrived with an extremely high concentration of assets in state ownership and in the hands of a limited circle of private individuals, who received almost 100% of these assets from the state in exchange for controllability and loyalty.

After the conflict between the president and parliament in 1993, power almost completely passed into the hands of the president and his administration, making parliament at best an advisory body, and the parties represented in it loyal to the president in exchange for economic opportunities. At the same time, the country had not yet developed the institutions of an independent judiciary, the laws were still archaic, contradictory and ineffective, the protection of property rights, investments, protection from changes in legislation and other attributes of reducing the risks of entrepreneurs did not work. The country has just experienced a default on its domestic debt and a six-fold devaluation of its currency against the US dollar. Under these conditions, there was a high demand for reforms in society, which was supported by the authorities, who saw no other way out of the economic crisis.

Higher oil prices at the beginning of the century led to rapid growth in budget revenues and revenues from sectors engaged in the extraction, transportation and processing of natural resources, and allowed the authorities to refuse to stimulate the process of expanding the tax base through reforms.

The growth in the well-being of citizens, which was a consequence of the proliferation of oil revenues, quickly created both society and investors the illusion of the correctness and effectiveness of government policy.

On the other hand, thanks to the ability to control oil flows, the authorities consolidated indirect control over the hydrocarbon industry, banking business and, through them, over the entire economic and political life of the country. This had a negative impact on the development of any non-oil business, on the effectiveness of economic and budgetary decisions, and on the influx of investment into the country.

In fact, by 2008, 65-70% of Russia’s budget consisted directly or indirectly of revenues from hydrocarbon exports, and the correlation of GDP growth rates, federal budget revenues and the size of reserves with changes in oil prices reached 90-95% (see tables and graphs) . Against this background, the ruble turned out to be significantly overvalued due to the massive influx of petrodollars - in 2006-2007, its market rate exceeded the calculated inflation rate by 35% (see chart). The economic development of Russia was influenced by three negative factors:

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1. The authorities, in their desire to control financial flows15, unwittingly worsened the investment climate, refusing to protect the rights of investors and entrepreneurs and even discriminating against them. This led to a reduction in the flow of investment, an increase in the cost of money, a decrease in entrepreneurial activity and an ever-increasing loss of financial and human capital - more than $1 trillion was withdrawn from Russia, the best businessmen and professionals left the country.
2. In the very first years of rising oil prices, a decision was made at the government level to sterilize additional budget profits into reserves. This policy, which fully justified itself during the crises of 2008 and 2014-2015, creating an opportunity to mitigate budgetary consequences, nevertheless increased the cost of raising money for businesses. As a result, the attractiveness of investment decreased, and the formation of capital-intensive or slow-growing areas became almost impossible.
3. The inefficiency of the non-resource sectors of the economy, the low level of investment, the hypertrophied public sector and the overvalued ruble led by 2007–2009 to such a level of wealth stratification of the population that the government could no longer ignore it. In the face of a decline in its popularity, the authorities decided to take populist measures aimed at unreasonably increasing salaries in the public sector and social benefits. These measures, reflected in the so-called May presidential decrees, together with continued high taxes on companies and social charges on wage funds, sharply inflated production costs, making domestic production unprofitable.

As a result, against the backdrop of a general increase in income - due to the export of hydrocarbons and rapid growth in consumption - Russia degraded in almost all areas of the economy, without ever creating a competitive productive sphere. Hydrocarbon production accounts for up to 20% of Russian GDP; up to 30% - trade, hypertrophied due to huge import flows due to petrodollars; about 15% - domestic energy market and infrastructure; another 15% came from government projects; 9% was the share of the banking sector. And finally, no more than 10% of GDP by 2013 belonged to the sphere of independent services and non-resource production. By 2014, according to Rosstat, the share of imports in the field of capital goods in Russia reached 85−95%, in the field of consumer goods - 50−70%.

This was compounded by unreasonable social policy: the growth of household incomes outpaced the growth of GDP, even taking into account the oil component. In 2013, against the backdrop of peak oil prices, GDP growth was only 1.3%, with investment decreasing by 0.5%, capital construction by 1.5%, and exports by 0.8%. Against the backdrop of inflation of 6.5%, wages in real terms increased by 11.9%, trade by 4%, imports by 1.7%, and the cost of public utilities by 8%.

The budget has become an employer for 30% of the working population, taking on an exorbitant burden. Three pension reforms effectively failed due to the authorities' indecisiveness and unwillingness to abandon the socialist principles of social security, and as of 2015, the Russian Pension Fund deficit was about 15% of federal budget revenues (about 3% of GDP). In addition, the budget was overloaded with ambitious, ineffective projects and exaggerated defense and security expenditures, and budget expenditures increased greatly not only because money was spent inefficiently, but also because of high levels of corruption.

According to the Ministry of Finance of the Russian Federation, in 2014, revenues from foreign economic activity accounted for 38% of federal budget revenues. Since the share of non-commodity exports in 2014, according to Goskomstat, was about 8% (but at the same time, export duties on non-commodity goods were approximately two times lower), we can conclude that the federal budget was filled by 35.4% directly from the export of hydrocarbons .

In addition, taxes, fees, payments for natural resources, except for taxes on foreign economic activity, amounted to 20% of the budget, and excise taxes and other taxes on imported goods - 13%.

VAT received on the sale of imported goods, which, as indicated above, were purchased 92% with funds from the export of raw materials, amounted to another 17% of the budget, that is, 15% is VAT on goods purchased with proceeds from the export of raw materials.

Summarizing the above, we can conclude that 83.4% of federal budget revenues came from the extraction and export of raw materials.

But that's not all. A significant portion of income taxes is paid by companies extracting raw materials. A significant portion of income taxes is paid by employees of the mining and fuel and energy complexes. Up to 40% of personal income taxes are collected from employees of federal enterprises and budgetary organizations - these are funds returned to the budget. It is not surprising that the correlation between the price of oil and federal budget revenues is more than 98%.

As a result, after the fall in oil prices, Russia was left with an undiversified, quasi-monopolized economy that lacks both factors and resources for growth.

Pessimists' expectations are not met

In 2014, many European analysts and economists expected the Russian economy to collapse soon and were surprised when they were told that the “oil shock” had successfully passed. Two factors helped Russia get through the oil shock relatively smoothly.

First, over the years of high oil prices, Russia has accumulated sufficient reserves. Gold and foreign exchange reserves were three times higher than the expected volume of imports in 2015; enterprises have created a sufficient number of fixed assets; the population accumulated more than $250 billion in banks and, perhaps, no less in cash, formed a stock of durable goods, and the average living space per person more than doubled.

Secondly, economic relations in Russia have been liberalized to a large extent. In particular, cross-border capital movement was not limited; prices for basic goods and services and labor costs were determined on the basis of market balancing of supply and demand; The ruble exchange rate was set, although not without the participation of the Central Bank as the largest player, but still in the market and according to market rules.

During 2014–2015, the Russian economy contracted significantly, but this happened without catastrophic deformations. The only dangerous moment could be considered the currency crisis of early December 2014, when the Central Bank’s unreasonable decision overnight to announce a doubling of the refinancing rate provoked panic in the markets. However, the situation was corrected very quickly by fairly tough statements from the government, which committed itself to refrain from other drastic actions.

By the fall of 2016, Russia arrived with a 40% reduction in the dollar equivalent of GDP compared to 2013 (a drop of approximately 15% in real ruble prices). The fall in household income is, of course, unprecedented, but it has so far returned Russians to the income level of 2007, that is, during generally stable times. Per capita GDP in Russia in 2016 will be about 8.2 thousand dollars. In the list of countries, this is the end of the seventh decade, next to Turkey, Mexico and Suriname, and in terms of GDP according to PPP, Russia will be at the beginning of the sixth decade - together with Latvia, Kazakhstan, Chile, Argentina.

These indicators are modest, but still far from catastrophic: the zone of “color revolutions”, in which Egypt, Syria, Ukraine, Colombia, Indonesia, Tunisia and the vast majority of other countries that experienced periods of instability were located at moments of destabilization, begins at around 6 thousand. dollars per capita nominal GDP.

The most important stabilizing economic factor was the reduction in imports, which outpaced both the fall in household incomes and export earnings. The reason for this reduction was a catastrophic drop in demand, which occurred, in turn, due to the rapid devaluation of the ruble and the extremely pessimistic mood of all economic agents without exception. As a result, the foreign trade account and the external account maintained a positive balance, and when oil prices stabilized at new levels, this led to a stabilization of the ruble exchange rate and a decrease in inflation.

RUSSIAN ECONOMY: ARCHAIC, RISKS, REDUCTION OF LABOR RESOURCES

At the moment, the Russian economy is being slowed down by a number of factors.

In the area of ​​productive resources, Russia, which has historically underinvested in fixed capital, even today faces almost 85% capacity utilization. And this despite the fact that a significant part (according to some estimates, more than 40%) of the production capacity in Russia is technologically and physically outdated and cannot produce products that are competitive and consumed by the market. For example, over ten years the machine park in Russia has almost halved, and such a reduction is rarely explained by the retirement of old, low-power machines and the commissioning of new, higher power ones.

To grow the economy, it is necessary to rapidly capitalize production and create new capacities. The state does not have the funds for this: the budget deficit in 2016 will exceed 3% of GDP, and in 2017 or 2018 it will most likely reach 5%; State-owned companies do not have free resources. Private and foreign companies are not ready to invest in Russia today due to a crisis of confidence.

In terms of efficiency, Russia is far behind its global competitors. We are talking about efficiency, both energy and logistics. Accordingly, the competitiveness of manufactured goods decreases, and this is a barrier to increasing production and sales markets.

In the area of ​​productive forces, Russia is increasingly suffering from a shortage of labor resources; they are declining due to natural demographic reasons by 0.5% per year.

Most of the labor resources are involved in areas with zero or very low added value: in the civil service, law enforcement agencies, private security, trade, and the extremely inefficient banking sector. The remaining part does not cover the needs of the state. There is a catastrophic shortage, even with the current level of development of production and services, of engineering and technological personnel, qualified workers and, at the same time, effective managers and management specialists.

The Russian public utilities industry actually rested on the semi-legal exploitation of the labor of millions of migrants, including illegal ones. Until recently, remittances (money transfers sent by foreign workers to their homeland) from Russia were the No. 1 item of state income in Kyrgyzstan and No. 2 in Tajikistan, significant for Ukraine, Uzbekistan, Moldova, and Belarus. Today, due to the sharp fall of the ruble and the purchasing power of the population, the number of labor migrants in Russia is sharply declining. Utilities and all types of businesses that employ a large number of unskilled workers, including chain retailers, are beginning to experience labor shortages.

Inconsistent and illogical policies in the field of lawmaking and law enforcement, as well as in the field of economics and entrepreneurship, have demonstrated to the investment and business community both inside and outside Russia that the government is unreliable, hostile to entrepreneurs, maintains high levels of corruption, and is prone to prioritizing public interests, programs and businesses to the detriment of private ones.

The natural reaction was the refusal to invest in Russia - first in long-term, and then in any projects - and the departure of local entrepreneurs and investors. Over 16 years, the share of private business in GDP has decreased to 30%. External debt fell to below 50% of GDP due to stagnant investment. We can assume that the Russian economy lacks investment and entrepreneurial resources. And they will not appear at least until there is a radical change in the management paradigm.

The devaluation resource in Russia is not too large either. Of course, the devaluation played a positive role in supporting exporters, the budget and smoothing out the problems of a “hard landing” of the economy. However, it is difficult to expect a positive effect from it in terms of GDP growth. Firstly, potential GDP growth in Russia is tied almost entirely to domestic demand—export growth requires capital investments and technologies that do not exist. That is, this growth is measured in rubles and is practically not growing. Secondly, almost 100% of Russian production is, to a greater or lesser extent, dependent on the import of raw materials, components or equipment (dependence varies from 15 to 70-80%), and due to devaluation, the ruble cost of manufactured goods and even services increases significantly faster effective demand.

The influence of external factors - much ado about nothing

Among the important foreign policy factors influencing the Russian economy are, perhaps, only sanctions (and counter-sanctions). In everything that does not concern sanctions regimes, the foreign policy situation for Russian economic agents is quite favorable: Russia is a member of the WTO and other international economic organizations, places its reserves in the most liquid instruments and currencies, carries out foreign exchange and foreign trade transactions without restrictions, yields on sovereign debts are at low levels. At the same time, hostile economic actions towards Russia and Russian companies (market protection, anti-dumping duties, restrictions on free trade, etc.) today are no more than usual, and no more than in relation to other countries, including developed ones.

And the sanctions imposed by the US and the EU do not have a significant impact on the Russian economy today. It is important to understand the essence of the imposed sanctions: they prohibit borrowing from international markets by a limited number of Russian commercial organizations, prohibit the ownership of assets in a number of countries, the entry of a narrow circle of Russian citizens, and, finally, prohibit the transfer to Russia of a narrow list of technologies, mainly related to the effective development of mineral resources and the creation of military equipment.

Restrictions on borrowing (even if we forget that the circle of organizations subject to them is very narrow) are unlikely to have an impact on a country that has been consistently reducing its external debt for several years. Nowadays, it is already less than twice as large as gold and foreign exchange reserves (and significantly less than the amount of gold and foreign exchange reserves and private assets in foreign currency not included in gold and foreign exchange reserves). Russia today does not need large-scale borrowing - most economic agents are reducing their balance sheets, not investing in development, and reducing turnover. Of course, financial sanctions, if they extend to a wider range of issuers and borrowers and include sovereign debt, could have a devastating impact on the economy in three to five years, when Russia runs out of capital reserves and is forced to raise funds in large quantities. But so far the scale of sanctions is not the same, and the situation may change dramatically in three to five years.

Of course, restrictions on technology transfer will have a negative impact on the state of the Russian economy in the long term. Limitations in exploration and production technologies (taking into account the fact that in Russia there are no such technologies, as well as the base for their creation) in five to seven years will have a negative impact on production levels and the cost of oil and gas. But today the effect of such a restriction is zero. The same can be said about military technologies - today Russia is actively increasing arms production and by 2015 brought the size of exports to the level of $14 billion per year (this is the third figure in the world after the United States and China), and sanctions have not yet affected this business.

Countersanctions, that is, self-restraint measures regarding food imports, which were introduced first against a number of countries (primarily the EU) and subsequently temporarily against Turkey, also do not have too much of an impact on the economy. “Import substitution” of prohibited items (that is, a proportional increase in the production of their exact analogues in Russia) did not occur, at least because as a result of the devaluation of the ruble, consumption decreased significantly - the loss in the volume of prohibited imports turned out to be insignificant in comparison. “Import substitution” goods have risen in price more than the average for everyday goods. However, due to falling demand and a total decline in the quality of domestic analogues (switching to surrogate ingredients, refusal to maintain technology, etc. in order to reduce costs and speed up the production process), neither excess production nor shortages appeared.

Perhaps the greatest negative impact on the Russian economy is Russia's unpredictable and inconsistent hostile behavior towards foreign economic institutions. Attempts to "autonomize" a country in vital areas are often the result of lobbying efforts by local players who operate poorly and on a limited scale, and by corrupt or short-sighted officials. This attempt results in significant expenditure of funds; to the fact that the result is a product that cannot be fully used as a replacement for modern technologies, and sometimes to a painful rejection of proven international technology. This really jeopardizes the security of Russia, but not because of a fictitious external threat, but because of a real one - the non-functionality of the substitute product.

2017 IS JUST A CONTINUATION OF THE TREND

The year 2016 was to some extent a surprise even for specialists who know the Russian economy well. The collapse of oil prices below $30 per barrel and their recovery to $50 per barrel by the fall did not have a significant impact on the short-term dynamics of economic indicators. Perhaps only the ruble to dollar exchange rate continued to behave as before, sensitively reacting to changes in the cost of oil. Despite the consistent decline in both oil and non-oil exports (which once again shows the importance of the Russian economy receiving petrodollars), the balance of the foreign trade account34 remained positive, primarily due to the rapid reduction in imports. The latter was caused by sharp cuts in government-funded programs, a halt in investment and, finally, a further fall in household incomes of about 8% year-on-year in real prices.

The economy in 2016 demonstrates the continuation of the process of slow gradual contraction, which, however, occurs without excesses. The industrial production index for 2016 is expected to average around 96% by 2015. And this is despite the fact that hydrocarbon production has already increased in physical terms by more than 3%, and the average oil price in 2016 promises to be higher than a year earlier.

Against the backdrop of pessimistic expectations of investors and entrepreneurs in Russia, the demand for money has decreased significantly - bank balances with the Central Bank of Russia have doubled over the nine months of 2016. With inflation around 6% per annum, the size of the M2 aggregate has increased by 11% since the beginning of 2016, apparently due to injections from the Central Bank into problem banks. The monetary base in Russia has continued to grow faster than inflation for at least eight years.

The Russian economy should also not expect big news in 2017. At least the commodity market promises to be more stable; oil, according to cautious forecasts, will remain in the range of 40-60 dollars per barrel, providing sufficient support for the budget.

One of the main risks of 2017 is the return of pent-up demand to the consumer and industrial markets. Indeed, in 2014–2015, consumers significantly reduced their consumption of durable goods due to negative expectations. Certain categories of goods still continue to experience the consequences of this decision. However, in general, in 2016, from January to September, imports fell by only 10% compared to 2015, while exports fell by 22%, and non-resource exports by 15%. Buyers are returning to markets using their savings because they need to replace depreciating goods - and this could be a warning sign. If exports continue to decline at a faster rate than imports, especially if imports begin to rise, Russia will face rising inflation and a depreciation of the ruble, despite stable oil prices.

It is reasonable to expect a continuation of the gradual and smooth decline in key economic indicators in 2017.

Inflation is unlikely to reach the 4% expected by the government (particularly due to the threat of a return of pent-up demand). However, due to the general depression, it is unlikely to go beyond 6-7%: the presence of reserve funds and the relatively high price of oil will allow the government to pursue a tight monetary policy.

The dollar exchange rate will, as before, follow oil and inflation.

GDP will continue to decline, as there are no growth drivers, business activity is declining, and the budget is not able to replace private capital in the field of investment.

The fall in key investment indicators will most likely be in the range of 10-20%, while long-term investments, including in capital construction, will fall more strongly. According to some forecasts, capital and especially housing construction may be reduced by up to 50%.

Thanks to the flexible exchange rate of the ruble, the Russian budget will, as in 2016, run a reasonable deficit. The government believes that it will not exceed 3% of GDP due to the emergence of “additional budget revenues,” mainly from privatization. However, the experience of selling Bashneft and a stake in Rosneft makes us skeptical about such forecasts. We are more likely to see a deficit of around 4% of GDP ($50 billion). The deficit will be covered mainly through the use of reserve funds. However, the government has already announced plans to begin large-scale borrowing on the domestic market, and 2017 will be indicative in terms of the market’s assessment of the risk of such debt and its cost.

The increase in the tax burden in 2017 will contribute to a further reduction in business activity and the withdrawal of an increasing share of medium and small businesses into the shadows. According to Rosstat, since the beginning of 2016, the number of small enterprises in Russia has decreased by 70 thousand (approximately 25%). Some of them, of course, simply retrained as medium and micro enterprises. But a large share of this decline is due to the closure of legal entities by entrepreneurs going out of business and going into the shadows. At the same time, since trade fades into the shadows much more easily than production, it will decline at a faster pace, losing the market to low-quality gray imports.

Against the backdrop of a general decline in production volumes in 2017 in Russia, we should expect a further rapid decline in product quality in a wide range of industries and an increase in the share of counterfeits and falsifications both in ingredients and in the final product. And not so much because of forced cost reductions by manufacturers, but because of weak control by regulators and a high level of regulatory corruption.

RUSSIAN BANKING SYSTEM: EMPTY INSIDE

The real capital of the Russian banking system is unknown. This is due to the fact that for many years the supervisory service of the Central Bank of Russia did everything to ensure that commercial and state banks hid the real state of affairs in their balance sheets and artificially inflated their capital. The change in the leadership of the supervisory service, which has just taken place, indirectly confirms the following fact: the banking system has reached the point after which continuing the policy of total window dressing will mean a quick disaster.

The efficiency of the banking system in Russia, even measured in terms of assets per employee, is several times lower than in the US and EU. The scale is significantly smaller, and the lending risks are an order of magnitude higher. And in 2017, these risks will grow: already in 2015, overdue consumer loans increased by 33%. As for commercial loans, the picture is unclear: it is still being retouched in every possible way to simulate the banks preserving capital. In particular, this leads to a deadlock with collateral for bad loans: banks do not sell collateral (today on the market they cost less than the sum of the loan volume and accrued interest) in order not to record losses. Pledged assets actually become ownerless: their owners no longer manage them, and banks are unable to do so.

The number of banks in Russia is decreasing by about 10% per year, today the number of operating ones is already below 500. At the same time, the concentration of assets is very high, the top 5 banks account for about 56% of the assets of the entire banking system, the top 50 - 88%. In order for the banking system to continue to serve the needs of the economy, a little more than 50 banks must be saved, and theoretically the failure of all the remaining banks would not have a significant impact (except perhaps the positive effect of some cleaning of the system and sterilization of the funds of unlucky depositors chasing higher interest rates).

The total capital of the banking system today formally does not exceed 9 trillion rubles. Theoretically, Russia can handle even a complete recapitalization of the system today, and in 2017, banks most likely will not need more than 1-1.5 trillion rubles for additional capitalization. Of course, 41 trillion rubles of loans issued - while we can expect a sharp increase in overdue debt and defaults - is a volume that the state will not be able to compensate. However, in the balance sheets of banks it is opposed by 44 trillion in deposits of organizations and individuals, and the state has in its arsenal of stabilization measures such effective means as, for example, the forced conversion of deposits and deposits in foreign currency into rubles at a low rate; freezing deposits with their transfer partly into bank capital, partly into long-term government obligations, etc.

But these are extreme measures, and we will not see them in 2017. The more distant prospect is another matter - a couple of years after the presidential elections, when the reserves of strength of the banking system are largely exhausted, even with oil at $50 per barrel.

Perhaps a more serious risk than the systemic collapse of the banking system is the sudden collapse of one or two of the largest banking institutions, for example one or more banks from the top 10, for the market and regulators. And as a consequence - a chain reaction of loss of liquidity and inability to make payments, an attempt by depositors to escape from the entire system and its paralysis. The task of the Central Bank is, on the one hand, to try to predict and prevent such a situation, on the other hand, to instantly respond to it by injecting liquidity into the system. There is no reason yet to doubt the Central Bank’s ability to cope with the task, but the likelihood of an error or delay is still higher than zero.

BUDGET AND ECONOMY: THERE IS A MARK OF SAFETY, BUT IT IS NOT ETERNAL

The Russian economy is in the process of crisis contraction, archaization and gradually losing international competitiveness even in those areas in which it is still creating a competitive product. In recent years, it has also developed a serious monetary imbalance. The Russian budget has been in deficit for three years now, and there is a large amount of excess liquidity in the off-budget part. At the same time, the problems of the budget, which was previously almost entirely focused on revenues from natural resources and significantly inflated during the period of peak oil prices, do not look either unsolvable or catastrophic from the point of view of maintaining the stable functioning of the state.

At the end of 2015, per capita GDP in Russia corresponded in real prices to the level of 2006, the level of average wages corresponded to 2007. Given the expected economic performance for 2016, these indicators will retreat for another year - to the levels of 2005 and 2006, respectively. The situation with federal budget revenues will look approximately the same, which all years of the 21st century, measured in barrels of Brent oil, amounted to just over 4 billion barrels per year. And 2016, with expected revenues of 13 trillion rubles ($210 billion - 4 billion barrels of oil at a price of just over $50 per barrel), is no exception: Russian federal budget revenues in real terms will approximately coincide with revenues for 2003-2004 years when the real cost of oil was comparable. All these years were not characterized by significant problems either in the economy or in the budgetary sphere.

At this pace, Russia still has room to retreat: at the peak of the decline in 1999, when it seemed that one more step and the economy would collapse, per capita GDP was 21% lower, and average wages were 40% lower than 2016 levels. And budget revenues were significantly lower.

Another thing is that the state budget has its expenditure part, which is almost twice the corresponding part of the 1999-2000 budget. And if a decrease in average wages or household income forces recipients to adapt to negative changes and reduce consumption, balancing the balance of the external account and the value of the currency, then a potential reduction in budget expenditures significantly reduces earning opportunities for pressure groups that are accustomed to ineffective spending and ever-increasing intermediary and corruption income.

Pressure groups will fight to maintain their earnings, preventing the budget from being cut. This process is already noticeable: since the peak, consolidated budget expenditures have fallen in real terms by less than 20%, that is, significantly less than total consumption. This trend leads to stabilization and even growth of the budget deficit and an increase in the tax burden in Russia in the coming years, which, in turn, will further slow down economic activity in the country. Influence groups will seek to make up for losses from declining budget flows by increasing their control over state and non-state businesses; by increasing rents, consisting of bribes; imposed equity participation; non-market sales of goods and services and obtaining non-market competitive advantages.

We are already seeing how this process is taking place in the oil and gas field through nationalization, in the field of foreign trade - through the consolidation of flows through sanctions, in the field of technology - through the formation of a new government order market around content control and restriction systems, in the field of construction - through the formation of new lists megaprojects and so on. In order not to lose the approval of pressure groups, the authorities will be forced to support their actions, which will further slow down the economy. Therefore, in the coming years, we can expect a further reduction in investment, a gradual withdrawal of an increasing share of private business into the shadows, and a rapid reduction in budget revenues (from the moment when taxes collected from the production and export of hydrocarbons begin to decline along with the volumes of production and exports).

This downward spiral will most likely lead the country to eventual economic collapse. But this will not happen soon: the process of economic contraction is slow, and the reduction in oil production due to underinvestment will begin no earlier than in three to four years.

As for the budget, the following measures can be used in combination to cover its deficit in the coming years: increasing tax pressure on the hydrocarbon industry, using the remaining government reserves, increasing public internal debt in various forms, reducing budget expenditures in a wide range of areas (including including in the area of ​​currently untouchable defense and security expenditures).

Calculations show that the state will be able to maintain the primary budget deficit at about 3 trillion rubles ($50 billion, 4% of GDP per year) for three to four years. An increase in public internal debt by 1.5−2 trillion rubles per year (2−2.5% of GDP) over five to six years, at a minimum, will not threaten the budget with excessive growth in interest expenses, and the remainder of the deficit can be covered by using the Reserve Fund ( as of mid-2016, there was still $38 billion left) and the liquid part of the National Welfare Fund for about three more years. But from 2020, the use of funds will have to be replaced by budget cuts in proportion to the fall in fees, increased taxes, and unsecured emissions55.

It is difficult to say when major changes in budget design will occur. If oil prices rise, then every $10 increase in oil prices will bring the budget from $20 to $40 billion. Thus, oil at $65-70 per barrel practically solves the problem of the budget deficit for today. Likewise, if oil falls even to the level of 30-35 dollars per barrel, the shortage problems will become much more acute and the situation will change dramatically by 2019-2020.

In any case, sooner or later Russia will have to radically revise the level of budget expenditures. Most likely, we will see one of two options.

Or a moderate reduction in social spending, a sharp reduction in defense spending and an attempt to return to a client position in relation to the international community: opening markets, requesting loans, IMF assistance, etc.

Either a sharp reduction in social spending, maintaining defense and security spending and a course towards complete economic and political isolation.

The second option seems more likely.

THE ECONOMY IS DECLINING - THE POPULATION IS NOT RESPONDING

There are several reasons for this phenomenon.

First, from the point of view of the vast majority of Russian citizens, the current crisis has come after a long period of economic growth. In the public mind, the fact that the situation today is still better than 15 years ago outweighs the perception that the situation has worsened. In order for mass discontent to arise, the level of income of the population, most likely, should drop by about 30-40%, to the level of 1999-2000.

Secondly, the growth of well-being in 2000-2012, as well as the subsequent stagnation and decline in 2014-2015, were extremely unevenly distributed in society. Only a small social group felt significant changes.

Indeed, in Russia in 2015, only 24% of non-Muscovites had foreign passports, while only 6% of Russians in recent years have traveled abroad once a year or more often. The median salary differs from the Russian average by almost 50% (that is, the income of half the population is shifted to the area of ​​very low salaries)58, less than 30% of the population has deposits in banks, and the number of owners of foreign currency deposits does not exceed 9% of the population. The Gini index, which at the end of the 20th century in Russia was about 8, today exceeds 18. The centers of concentration of wealth growth in Russia are Moscow and several other large cities. In Moscow, by 2014, per capita GDP was about 30 thousand dollars a year; by 2016 it fell to about 20 thousand dollars, and this level is still high enough to cause a social explosion. And over the past 15 years, the vast majority of the country’s population began to live only a little better, and in recent years - just a little worse. The changes are not so significant as to cause a sharp increase in protest sentiments.

Thirdly (and only thirdly), unlike Western democracies, in Russia there is no public competition between elites for power, accompanied by active criticism of the ruling group through independent media and other channels - competition that is financed and organized by opposition groups of the elite. The information space is ideologically monopolized. And if in developed democracies the media, as a rule, exaggerate economic problems for propaganda purposes, and opposition forces have the opportunity to coordinate social actions through information sources, in Russia today they downplay problems, relieve the authorities of responsibility, transferring it to external factors, and the opposition is deprived access to capital and the ability to coordinate protests.

HYDROCARBONS ARE ESSENTIAL FOR EXPORT

Russian GDP throughout the oil crisis of 2013–2016 shows a surprising stability of composition: most of the main areas of activity practically did not change their share.

Russian exports, in addition to hydrocarbons and their primary processing products, have three more significant items: export of metals, export of agricultural products and export of military products.

Exports of metals from Russia, as well as exports of hydrocarbons, are suffering from a general decline in commodity prices. In 2015, there was even a situation where domestic prices for a number of metals exceeded world exchange prices. Over the previous 15 years, exports of ferrous metals remained at about $20 billion per year, while exports of non-ferrous metals grew, reaching $40 billion per year by 2011–2012.

Today the situation has changed dramatically: over the six months of 2016, Russia exported metals worth less than $20 billion, of which non-ferrous metals amounted to less than $4.4 billion. Russia is one of the world leaders in sales of metals to the foreign market, and expect It is unlikely that its market share will increase significantly. The slow development of the market cycle suggests that metal prices are unlikely to rise significantly in the foreseeable future. But even if they grow, it is unlikely that Russia will be able to significantly increase export sales compared to the maximum levels of previous years. The market is very competitive, there are multiple trade barriers and restrictions around the world, and more than 20 countries have imposed restrictions on Russian products alone.

Agricultural exports have been growing recently, and their volumes can still grow significantly - of course, subject to significant investment and continued benefits to producers. However, such exports generate almost no tax revenue and do not form the basis for investment in other areas of production. The added value from agricultural production is very low, the total share of agriculture in Russia's GDP does not exceed 3%, in the world the share of agro-industry in GDP has been significantly declining for more than 30 years in a row. Rather, an increase in agricultural exports will lead to an additional burden on the budget in the form of the need to increase subsidies, sponsor preferential lending and build the necessary infrastructure at budget expense.

Russia's arms exports are carried out mainly on credit, and most of these loans are never returned. Moreover, Russian exports are poorly diversified: India, Vietnam, Venezuela and China buy more than 70% of all Russian exports.

Of course, in the future, the inability to use world achievements in the development of dual-use technologies will lead to the fact that Russian weapons will begin to lag behind its closest competitors - the USA, EU, Israel and, most likely, China. Already today, Russia’s position on the international arms market is weakening. It looks like it will lose the Indian market (primarily military aircraft). China, which is still buying Russian air defense systems, is already focusing on its own developments in the field of aviation. In 10-15 years, when the focus in this area shifts to sixth generation systems in developed countries (and, accordingly, fifth generation in developing countries), Russia will have nothing to offer on the market.

The development of new export directions requires Russia to create conditions for simultaneously achieving financial efficiency of production on its territory and an acceptable level of quality and consumer properties of goods. Unfortunately, there are no prerequisites for the formation of these factors.

The average salary in Russia, although it has decreased quite significantly compared to 2008–2010, still remains significantly higher than in countries that are Russia’s main competitors in terms of location of labor-intensive production. Transport infrastructure is quite expensive, and export operations are practically monopolized, and the cost of entering the international market is much higher than that of competitors. The overall tax burden on business in Russia is approximately 10% higher than the average in European countries. An ineffective pension system that has no chance of surviving even one generation and a corrupt, ineffective healthcare system give rise to an actual doubling of pension and social savings. After paying high social and pension taxes to the budget, salaried workers are forced to allocate additional significant funds for medical care and “old age.”

From the point of view of product competitiveness, Russia obviously loses to most foreign manufacturers. There is no tradition of competition in Russia. The state's paternalistic attitude towards producers and the extremely irrational distribution of labor resources, coupled with low mobility of the population, lead to the fact that unviable, expensive and low-quality production continues for decades, receiving subsidies. Sanctions and protective duties do not contribute to the development of competition, allowing domestic producers not to care about quality. 70% of GDP is produced by state and quasi-state companies, which easily monopolize the market and thereby sharply reduce their costs on marketing and quality control. Many manufacturers lack the scale and ability to enter international markets. Foreign economic activity is heavily regulated (all exporters complain about this), and the cost of customs procedures is very high.

Repeatedly announced measures to simplify foreign trade activities, provide preferential loans for export supplies, and develop competition turn out to be just words, as are promises of reforms in other areas. The government continues to rely entirely on the extraction and export of natural resources - fortunately it still has some time and stability.

The government's plan is a slow movement to a dead end

The Russian government will be concerned about finding ways to improve the quality of administration in order to ensure the filling of the budget and satisfy the monetary appetites of pressure groups. At the same time, no measures, conventionally called reforms, can solve the problem of immediately balancing the budget. On the contrary, reforms are more likely to lead to the fact that in the next three to five years more funds will need to be spent, an imbalance in the economy will appear for a while - and the crisis will worsen.

Today's Russian government, which considers its mission to be self-preservation against the backdrop of a stable society, simply cannot afford such experiments. Real trust in the authorities in Russia is very low. Less than 29% of the population, according to the Levada Center, admit that they believe the statements of senior officials. This figure corresponds to the results of the last Duma elections, in which the turnout ranged from 30 to 40% and from 35-40 to 52% of participants voted for United Russia. More than 60% of the population did not find worthy candidates and boycotted the elections; the share of those who voted for power ranges from 10 to 20% of the population. Left-wing sentiments are gaining strength in the country: calls for restrictions on foreign trade and market mechanisms, large-scale emissions, nationalization, and public investment in infrastructure are increasingly finding support in society. Under these conditions, the government does not have a mandate for reform, and maintaining the status quo remains its only option.

The expected administrative measures from the point of view of economic theory will be aimed at increasing budget revenues without changing the economy itself or relationships in society and can be of six types:

Increase in the number of taxes and fees

Given the depression in the economy, the authorities cannot radically increase the tax burden, especially in the case of businesses that are sensitive to it. Therefore, the increase in the tax burden will occur in the area of ​​either the budgetary cycle; or an unavoidable base; or an extremely broad base, so that a very small increase will produce significant increases in revenue (property taxes, toll and parking fees, excise taxes on widely consumed imported and domestic goods, introduction/increase of fees for kindergarten, school, etc.).

Preference will be given to those methods that will allow private agents from among the “close” members of the elite who receive their commission to be placed between the budget and payers; sometimes it will reach 100% of the fees.

Expanding the tax base

We can expect a reduction in the number of benefits, existing benefits will be given an indication of non-application, and the courts will provide support to the tax authorities.

Discrimination

For a minority of the population that does not directly affect the stability of the system, discriminatory laws may be adopted that will ensure budget replenishment.

For example, exponential tax rates on real estate, cars, and art may be introduced; significant fees have been announced for holding a foreign passport; foreign spending is limited and taxed; a very high income tax rate was introduced for the high earnings of the “top” 3-5% of the population.

Living in the city center, living in a separate house, and having autonomous utility systems may be subject to permanent taxes; purchase of high-quality equipment, jewelry, expensive items of clothing - one-time purchases.

Reducing the base of budget recipients

We will inevitably come to raising the retirement age.

Spending on education and health care will be underfunded and often diverted in non-transparent directions.

All manufacturers of goods and services purchased by the budget will be given strict instructions to reduce the cost of supplied goods, including at the expense of quality. Quality checks will be finally formalized.

In areas that are not obvious to the general public, the list of funded positions and volumes will be reduced. First of all, quotas for medical procedures, volumes and quality of drugs supplied to hospitals will be affected; funding for “side” social institutions that are not related to the interests of influence groups, such as music schools or out-of-school educational institutions, will be reduced (almost to zero). Such institutions will be partially transferred to a paid basis, and partially transferred to organizations that want to spread their influence and are loyal to the authorities, in particular the Russian Orthodox Church. The elites of the regions (and there are several of them), whose trust is now bought by generous funding from the center, will be asked to significantly reduce their appetites. In case of disagreement, there is always the possibility of using harsh force. And if they turn out to be unsuccessful, costly or lead to great casualties, there will be something to blame for economic problems and use the situation to distract society from problems with the economy.

Requisitions

Requisition actions in relation to bank deposits are quite possible:

— mass bankruptcy of banks with the transfer of assets to the state;
— forced exchange of foreign currency deposits into rubles at a low rate;
— forced exchange of ruble deposits for long-term obligations of the state and shares of the banks themselves, especially state-owned ones.

Requisition of capital abroad is possible - for example, a complete ban on property abroad for Russian residents with the requirement to bring money into Russia and subsequent currency exchange.

Requisition of businesses is also possible: partly to increase budget revenues, partly in favor of large and small local agents of influence groups (to satisfy their appetites as a replacement for direct budget revenues).

At some point, judicial confiscation of property may begin: the state will “by law” take the property of those who have become unwanted or simply weaker asset owners and sell it for very little money to strong and loyal agents of influence. The budget will make a profit, and the cost of maintaining loyalty can be reduced.

Economic conditioning

Many public services that the state provides today free of charge or for a nominal fee can be used to reduce its costs, in particular on wages.

Compulsory work in the public sector for students - for several years after graduation at a reduced salary - can become a condition for free education.

Compulsory service in the army or in alternative economic service, regardless of admission to a university, can become a condition for free education at school.

The announced privatization can hardly be included in the list of measures that the government is taking to improve the situation and replenish the budget.

The value of assets in Russia today is very low, and there are few people willing to buy them. And in the best case, privatization will result in the requisition of capital from unwanted oligarchs (but it will not be enough to solve problems), the redistribution of cash, for example from Surgutneftegaz to Rosneft, or the sterilization of deposits in banks and funds in non-state pension funds.

The recent widely publicized deal to privatize the oil company Bashneft - a deal that was supposed to take place in parallel with the sale of the state stake in Russia's largest vertically integrated oil company Rosneft - clearly showed that privatization in Russia cannot be expected to reduce the state's share in the economy, nor receiving additional funds. In the end, the buyer of Bashneft was Rosneft, which was already heavily indebted to the state. The state's share in Rosneft, due to the complete absence of third-party buyers, will be turned into treasury shares - most likely through lending to Rosneft by Vnesheconombank.

All these measures, half-measures and imitations of measures, due to the obviously negative reaction of the economy, will lead to a further reduction in the possibilities for generating budget revenues and (or) be of an irreproducible, one-time nature. Within five to six years, their potential will also be exhausted, and the pressure from the “left” will only intensify. This means that Russian society, accustomed to paternalism and expecting the state not to create conditions for prosperity, but to increasingly subsidize the standard of living, will demand indexation of wages in the public sector, benefits and pensions, increased spending on ineffective social infrastructure and support for imports.

The elites, and above all the so-called “systemic opposition parties”, accustomed to exchanging loyalty to power for stable flows of funds from the budget into personal pockets, will also be dissatisfied with the reduction in official allocations and informal opportunities. It can be expected that the “left” parties, which in total received more than 40% of the mandates in the new Duma, will, as they begin to understand that the government is losing support, and they are the only ones who can get it, will increase their independence from the authorities and put pressure on her. In particular, to demand more and more populist steps, to blackmail the authorities with a refusal of support and the start of an independent game. The authorities will be forced to make ever greater compromises: increase the scope of price and business regulation, increase unsecured emissions, close the domestic market, de facto nationalize entire industries and confiscate savings and property, and introduce further restrictions on cross-border transactions.

The decline in the ability to import consumer goods and industrial products (due to a reduction in the volume and value of exports) will lead to the development, mainly under state ownership or with large-scale state support, of replacement industries. However, their effectiveness - in the absence of access to modern technologies, an international R&D school, full-fledged industrial cooperation and cheap financing - will be low, and the cost in a small market will be high. And Russians will have to remember the consumption standards of the late USSR, when even low-quality domestic goods were in short supply, and entire groups of them (cars, electronics, real estate, high-quality clothing) were unavailable due to high prices.

Russia will be drawn into a long-term period of so-called Peronist economic policy. According to the experience of other countries, such periods can last more than ten years, and their consequences, including social ones, can be traced much longer.

Even if the authorities manage to maintain the stability of the economy and prevent the catastrophe that happened at the turn of the 1990s of the last century, Russia may face an even less optimistic scenario. There is a high probability that the current moderate-conservative authoritarian regime, as it exhausts its economic opportunities to maintain the loyalty of the population, will be replaced by a tougher, left-conservative paramilitary or military regime, the support of which by the population will be based on a mixture of dissatisfaction with the current state of affairs and fear of outside world.

Such a regime will delay the development of the country even more.

BLACK SWANS OF THE RUSSIAN ECONOMY

The probability of the next development of events is small, but you should not discount it.

In our baseline scenario, the Russian economy shrinks proportionally for at least three to four years, after which socialization processes begin to prevail. Gradually, price and currency regulations arise, foreign trade is monopolized, large-scale nationalization is accelerated, regulated wage levels and guaranteed consumption are introduced, etc. As a result, the economy is able to contract further, but does not collapse for several more years, perhaps more than ten.

However, this process may be interrupted by serious events, as a result of which the situation will begin to rapidly develop uncontrollably towards the severance of internal economic ties, naturalization of the economy, rapid dollarization of the economy and loss of foreign exchange control levers, a landslide reduction in budget revenues, the emergence of total deficits and the formation of large groups of the population who are unable to provide for themselves.

In turn, these phenomena will be followed by a sharp increase in crime; autonomization of almost all regions (and donors who will no longer want to share, and dependents who will look for options for survival in the face of the cessation of subsidies) up to active and, possibly, successful attempts at secession; the emergence of local armed conflicts, primarily the return of tension in the North Caucasus - and, most likely, a series of attempts to change power like a palace coup. Then, probably, there will be a long period of political instability and, perhaps, even the collapse of the country - according to the model of the USSR or as a result of much bloodier processes.

It is unlikely that any isolated event could lead to the described scenario in the coming years. However, a combination of two or three factors discussed below may well serve as a sufficient condition for the onset of a disaster.

Banking crisis, not compensated by government injections and additional capitalization due to the slowness of the authorities or inability to make decisions

If a large-scale banking crisis or the catastrophe of one or two large banks, as mentioned above, is not extinguished by the provision of liquidity before payers begin to experience difficulties with making payments, and panic begins among depositors, a sudden dehydration of the banking system is possible, an attempt mass withdrawal of savings into cash (even with a direct ban) and into tangible assets, an instant jump in inflation and the exchange rate and the loss of the ruble’s function as a measure of value.

A similar situation occurred in Germany in the mid-1920s, when inflation and prohibitive calculated risks quickly deprived businesses of incentives for development - and the economy responded with a sharp decline.

Failure or significant reduction in the performance of a significant number of infrastructure facilities

This may occur as a result of natural depreciation, a decrease in the quality of service, interruptions in the supply of spare parts and electricity that occurred due to general budget cuts and lack of investment in equipment modernization. Under certain conditions, accidents at key infrastructure facilities, even if they do not cause casualties or damage to other facilities, can significantly affect the country’s economy. Particularly dangerous in this sense are utility systems (water supply, gas supply, household electricity supply), problems with which may arise due to underfunding and local collapse of housing and communal services systems.

Sharp drop in hydrocarbon production

Let us consider this possibility in the context of continued low prices for oil and gas on the foreign market.

The oil extraction methods used in Russia are ineffective in terms of the recovery rate, which is currently lower than in the United States, on average by 30% and is slowly declining, while in the United States it is slowly growing. The maximum possible production in Russia will fall and, according to some estimates, by 2035 it will be reduced by at least half. We do not fully know the level of long-term negative effect from the current practice of accelerated oil production in Russia, but it is scientifically confirmed: this practice leads to a decrease in the recovery rate. It is quite possible that production will begin to decline significantly in just three to four years, and Russia’s lack of modern exploration and economical production technologies, partly due to sanctions, will not allow it to increase. We can see how this happens in the example of Venezuela, which has lost almost two-thirds of its possible production in ten years and is already purchasing oil abroad.

The introduction of an embargo against Russia on the purchase of oil and gas by European Union countries could have a similar effect. Theoretically, the EU will be ready to abandon Russian oil within three to four years, but so far the EU has not publicly announced any reasons for this or such intentions.

Collapse of large industries

Due to the decline in purchasing power in Russia in the coming years, the demand for various services and goods, primarily durable goods, will change significantly. A whole range of industries are under threat - from mass ones, such as small individual service enterprises, to large ones, such as the construction industry.

The cost of construction per square meter in Russia has decreased in recent years by 20%, to the 2002 level, but prices on the market have also fallen to the 2001 level (all in real rubles). In such price parameters of supply and demand in 2002, the volume of construction was 49 million square meters. m per year, and not 138, as in 2014, no more than 5 million people were involved in the industry, and not 5.7 million, as today.

It can be assumed that the volume of construction in the absence of global subsidies will tend to 50 million square meters. m per year or even be lower, and 1 million people will become unemployed in this industry alone.

You can add to the list the banking industry, transportation business, tourism, hotel and restaurant businesses, import trade, etc. There is a possibility that there will be a one-time and mutually inducing collapse of several industries with an increase in unemployment by 5-10 million people (8-12%) - up to 13-18% of the labor force.

Neither the state nor business has anything to offer these workers. Investment activity in the country is practically zero; the industries that 12-15 years ago (when construction was on a much smaller scale, like individual services) provided jobs for these people have greatly declined or died out.

Internal conflict among pressure groups

The situation is unlikely, but possible.

It is unlikely because the interests of pressure groups are quite well divided, arbitration between them is established, and it seems that all groups strive to preserve peace.

On the other hand, the experience of many countries shows that conflict, despite the high level of organization of checks and balances, often arises if the share of rent in GDP falls below 10-12% and distributed flows begin to be insufficient, and per capita GDP is low - below 6 thousand . dollars In Russia, the share of rent in GDP is only slightly higher (about 16-17%) and is slowly decreasing; per capita GDP, according to the forecast for 2017, is about 8 thousand dollars.

Again, from the experience of other countries, we know: a conflict between influence groups, even if it does not directly develop into a clan war, still entails significant destabilization of the economy. This is due to significant personnel changes, including the resignation of top officials, the adoption of opportunistic but extremely harmful decisions for the economy, a sharp increase in risks due to the transfer of the clan struggle to the legal plane (the use of large-scale criminal cases), etc.

The same situation often develops even in stable and well-organized elites, if the key person(s) responsible for the balance of interests falls out of action. In Russia today there is only one such person, and although the likelihood that this person will suddenly cease to effectively perform the functions of an arbiter and controller of interests is low, it is still not zero.

High risk of a very expensive, irreparable and irrational decision

In modern Russia, where power is non-institutionalized, there is no competition and systems for critical evaluation of decisions and actions, and public opinion is significantly distorted by propaganda and distracted by false agendas, such a risk exists.

We are talking about a decision that will cause a sharp change in the situation and lead to extremely negative economic consequences.

It is difficult to predict what kind of decision this will be: perhaps an increase in the tax burden, which will cause a collapse in business activity; perhaps escalation or the initiation of new military or hybrid actions, the cost of which will ultimately undermine the economy or lead to sanctions of a completely different level; or a decision to impose strict regulation of prices, capital transactions or exchange rates.

INVESTMENTS IN INFRASTRUCTURE WILL NOT BE EFFECTIVE

There is evidence of a direct link between the level of public investment in infrastructure and economic growth. However, it is necessary to understand that this connection does not always work and not everywhere.

Any investment actions - that is, in fact, offering the market new opportunities - must correspond to demand, which either already exists or can only be formed. Otherwise, they are economically meaningless.

We know of cases of boosting the economy through investment in infrastructure in situations where business demand for infrastructure significantly exceeded supply.

This phenomenon is observed in African countries where there was insufficient infrastructure for even basic development of trade and industrial relations. At the same time, foreign companies were ready to invest in the economy, and the local population was ready to join modern-type economic relations. We remember examples of new territories in the USA, Canada, Mexico, and other countries where it was the expanding business that pushed the state to invest (by the way, not all investments in infrastructure were state-owned).

That is, this model works most effectively where the level of infrastructure is extremely low and the demand for development is high. In countries with an average level of infrastructure, like Russia, the effect is usually much smaller. So much so that the question arises: in cases that can be considered “successful”, was the onset of public investment in infrastructure a reaction to increased economic activity?

In today's Russia, the depression of economic development is not associated with the infrastructure ceiling, and the high cost of transportation, communications and logistics does not affect the increase in the cost of the product as much as risk factors. In addition, Russia lacks the capital and labor resources to support rapid growth.

Under these conditions, large-scale infrastructure investment by the government is likely to face the following series of problems:

Planning

Not the necessary areas of investment will be chosen, but areas that are beneficial to the most powerful lobbyists.

Financing

Projects will have large initial re-estimations; up to 50% or more will be spent in excess of the actual cost; most of it will go offshore, reducing the ruble exchange rate.

Performance

Work will proceed slowly, without meeting quality standards; Some objects will ultimately be of little use or unsuitable for effective use.

Usage

The facilities will be underequipped, understaffed, and the demand for their use is in question. The lack of additional investment in maintenance and adaptation will doom many facilities to idle time.

Impact on overall demand

Funds for infrastructure investments will be received by emission, their proliferation into the economy will lead to increased inflation, the total volume of effective demand will only decrease, and the demand for these objects will decrease even more.

Impact on the business climate

Shifting resources to public investment will reduce business activity and increase costs for independent businesses. In conditions of low production volumes and a shortage of labor resources, government investments will draw on both raw materials and workers, raising both prices and wages. Using cash flows for direct imports (raw materials, materials, equipment) and indirect imports (goods for sale to those working on projects) will temporarily increase imports and create additional pressure on the ruble exchange rate and the social sphere.

Influence on domestic policy

The emission nature of spending will provide temporary income to the elite associated with power, which will weaken their need for real reforms to maintain their income. Thus, reforms will once again be delayed, and the country will roll back even further down the level of development. The gap from competitors will become even greater.

Influence on foreign policy

The combination of domestic sources and worsening economic problems will require a shift in the population's attention and will make foreign policy even more aggressive to maintain the rating. This will reduce the likelihood of both attracting foreign investment and integration into global technological processes.

But even if we assume that there is a demand for infrastructure in the country and all the above-mentioned problems can be avoided, the volume of public investment to boost the economy, which is already at the Russian level of per capita GDP and infrastructural development, should be colossal.

Statistically, if a middle-income country with a stable level of public investment in GDP of 3-4% increases investment in infrastructure by 1%, this gives a one-time increase in GDP of 0.08% with a 75% attenuation over the year. In order to achieve GDP growth of 3% per year, Russia needs to start by increasing public investment by 36%, next year increase it by another 18%, then by 9%, then by 4.5%, and so on. In total, state investments should increase by 3.7 times (and if we take into account that 50% of our investment will be spent on corruption schemes and inefficiency, then by 7 times). According to the most conservative estimates, Russia will have to invest 15% of GDP in infrastructure for many years. For comparison: Mexico spends 5% of GDP on infrastructure, India - 10%, Indonesia - less than 7%, China - from 6 to 11%.

EFFECTIVE REFORM

The Russian economy has two basic problems: risks that are disproportionate to income-generating opportunities, and over-regulation.

The most primitive (but very correct) economic model says: growth occurs where entrepreneurs and investors see a positive difference between the level of expected income and the level of expected risks from investments or starting projects.

Thus, for the economy to grow, it is necessary that either potential income be sufficiently high, or the risks of doing business must be significantly reduced. Under these conditions, capital itself begins to flow into the country - and entrepreneurs develop new investments. At the same time, the market, with minimal government assistance in the form of reasonable regulation, is able to identify growth points.

In Russia today there are no areas in which one can expect super-profits. Russia is a country that has quite strictly isolated itself from international cooperation and with a relatively small population for an isolated market (only 2% of the entire Earth) - this is not enough for business to reach the level of competitive prices and quality on a global scale.

Russia is a middle-income country; there are virtually no niches left for high-margin businesses, especially today, when residents’ incomes are falling.

Russia is a country of quasi-monopoly conglomerates that provide services vital to business (energy supply, transportation, etc.) at inflated prices.

Russia is highly dependent on imports, meaning Russian companies purchase raw materials at high prices - and they are subject to increased taxes.

In this situation, the only way to increase the country’s economic potential is to reduce risks. In developed countries, such as the Nordic countries, the USA, Canada and others, the space for generating windfall income is also limited, if it exists at all, primarily due to high competition, high taxes and slow consumption growth. Nevertheless, the average growth rate of per capita GDP in these countries exceeds 1 thousand dollars per year (which for Russia would be 13% per annum!) - this result was achieved due to the extremely low risks of doing business.

The basic risks with which to start are the risks associated with ownership of property and law enforcement - both in disputes with the state represented by regulatory, law enforcement and fiscal authorities, and between business entities.

Unfortunately, it is impossible to briefly outline coherent and detailed proposals for fundamental restructuring of the system in order to minimize enforcement risks. However, it is worth indicating the directions of movement.

Required:

1. large-scale legislative changes aimed at protecting entrepreneurs and investors;

2. guarantees of the primacy of international courts and law;

3. presumption of innocence in cases against the state;

4. prohibition on initiating criminal cases in the absence of a supporting decision and even direct transfer of the case in civil proceedings;

5. widespread introduction of jury trials;

6. business protection program when owners or top managers are accused;

7. independent universal election of judges starting from the lowest level;

8. a system for protecting the bona fide purchaser and removing all liability from the holder of the rights, if the rights were actually issued by the state, regardless of the violations committed by the state;

9. 100% property amnesty, etc.

All this should lead to entrepreneurs and investors reconsidering risk assessments and a transition from today’s feudal-corruption model of law enforcement to a model based on competition between the parties and compliance with the law.

Finally, a very important part of the risk reduction system is a set of legislative measures to protect investors and entrepreneurs from changes in legislation, decisions and actions (not only illegal) of government bodies and other actions or inaction on the part of the state or any officials in any forms that entail represent losses or lost profits.

In particular, such legislative acts should protect investors and entrepreneurs from those changes in legislation and government decisions that significantly worsen the conditions for doing business - if the business was created or developed in reasonable anticipation of previous conditions and (or) if the state in one or another gave guarantees or assurances in any other form, including verbal ones, that the conditions would remain the same.

And of course, mass lawsuits and defense in international courts should be allowed without any reservations.

The economic situation in our country causes concern among citizens. More and more often we hear that production facilities are closing and there is not enough money to pay wages. Experts say there is a budget deficit and the need to reduce social benefits. How will the situation develop in 2017, will there be economic growth in Russia or will we have to go through another wave of crisis?

Russia is one of the richest countries in the world. However, the history of the development of modern Russia is associated with many erroneous reforms in the 90s, which have an impact on the state’s economy to this day. The situation was aggravated by sanctions and falling oil prices. Experts say that the country can overcome the current difficult economic situation, but for this it is necessary to look for fundamentally new solutions that will strengthen economic growth, and not aggravate the situation.

Let's consider the main factors that led Russia to the development of a difficult economic situation:

Raw material factor

According to experts, Russia is highly dependent on gas and oil prices. Today we have not yet managed to free ourselves from this dependence. The country needs innovative development strategies that will reduce its dependence on raw materials and strengthen other components of the economy. However, this requires significant financial investments. According to analysts’ forecasts, there will be no such funds in the country’s budget in 2017, which means that we will not be able to implement these plans.

Leadership on the world stage

Pursuing the policy of a world power, Russia is obliged to spend enormous amounts of money on its defense complex. In order not to lose leadership on the world stage, we have to prove our military worth every day. Today, an average of $80 billion a year is spent on maintaining the army, which, given the current situation, hits the country’s budget quite hard.

Manufacturing and Energy

Today, many enterprises are closing, there is no money to pay wages and purchase raw materials. There are also problems in the energy sector. The transfer of energy resources into private hands has led to the fact that the state can no longer control the operation of individual strategically important facilities, and the owners of these companies act only to obtain personal profit, forgetting about state interests.

Decline in population income

The fall in the ruble exchange rate, rising prices and worsening lending conditions will inevitably lead to a decrease in consumer demand in the country in 2017.

This, in turn, will affect the growth of production of goods, trade turnover and the market for paid services for the population.

This trend will worsen the difficult economic situation in the country.

Credit system

Consumer lending in our country is one of the most difficult issues. The population, which has already incurred large debts, sees no other way but to resort to new loans. However, banks have increased interest rates in recent years, which leads to an increase in problem loans and a decrease in lending in general. According to expert forecasts, in 2017 we will see a decrease in demand for lending, which will negatively affect the overall economic situation in the country.

High level of corruption

Our country, like many others, has not yet been able to defeat corruption. According to the most conservative estimates, the share of stolen funds is 1/3 of the total number of domestic investments. Money simply disappears from circulation and ends up in the foreign accounts of dishonest officials. Also, private entrepreneurs are in no hurry to show real income. High taxes make transparent work simply meaningless.

What will happen to the national currency?

Today, experts give rather optimistic forecasts regarding the ruble exchange rate for 2017. In their opinion, we will see a strengthening of the national currency by the middle of next year. According to analysts, the ruble may strengthen at around 64.6 units per dollar.

Forecast of the economic situation

Many both domestic and foreign analysts believe that Russia still has enough reserves to cope with the economic instability in the country in 2017. A. Kudrin states that if sanctions against Russia are weakened, our country will be able to overcome the economic crisis within 2 years and economic growth will begin.

Experts also give optimistic forecasts regarding oil prices. According to their statements, hydrocarbon prices will invariably stabilize and strengthen next year, which means that the ruble will also rise. According to Mr. Ulyukaev, 2017 for Russia will be better than the previous one.

The minister is confident that the volume of foreign investment should increase next year.

However, experts make a reservation that if the general situation in the country is not changed, even rising oil prices will not save Russia from inflation if there is a ban on its sale. This is why we should not rely only on raw materials in 2017. The Russian government must take concrete steps to eliminate unfavorable factors. First of all, it is necessary to fight corruption at the state level, it is necessary to create better working and taxation conditions for private entrepreneurs, and it is necessary to change the country’s foreign policy.

What can ordinary people expect?

According to the country's leadership, there is no need to panic. Yes, this is a difficult time for Russia, but ordinary people have nothing to worry about. Pensions and wages will be indexed. People will not starve, jobs will be preserved as much as possible. It will be difficult for entrepreneurs, but today government support programs for private entrepreneurship are already being developed.

The country's government also says that we do not need to be afraid of sanctions. This is an excellent chance to develop your own production and various industries. We must not forget that our country has enormous resources that need to be developed and used to the fullest.

According to experts, the peak of the crisis in Russia has already passed. Now we are waiting for a slow but sure recovery and economic growth. But what there is absolutely no need to be afraid of is a default and complete collapse of the ruble. Our currency, although weakened, is still strong enough to prevent devaluation.

Thus, economic forecasts for 2017 do not contain anything terrible. Yes, we won’t live noticeably better in the new year, but it won’t be worse either. According to statements by President V. Putin, our country is now experiencing a gray period, which in the coming years will be replaced by a white one, and a period of economic growth will begin in Russia. We can only believe and wait, but do not forget that each of us must make our contribution to the development and strengthening of our state.

The Russian economy in 2017 was full of contradictions. GDP has started to grow, but it cannot be called sustainable. Consumer spending rose while income fell. Inflation dropped below 4%, although not everyone believed in achieving this goal

In this material, RBC decided to collect everything unusual that happened to the Russian economy in the past year. These may be phenomena that deviate from the norm (inflation, which for the first time since the early 1990s has moved to a completely different quality, more characteristic of developed economies) or diverged from expectations (contrary to hopes for Donald Trump, there were more sanctions, not fewer, but the ruble and Russian government securities still strengthened). These are visible macroeconomic paradoxes, which can often be explained by imperfect statistics (multidirectional dynamics of real wages and incomes, growth of capital investment while construction is falling).

Prices couldn't be lower

Having broken through the Central Bank's target of 4% back in the summer, by November inflation slowed to a historical low of 2.5%. “No one expected such inflation,” admits Raiffeisenbank macroanalyst Stanislav Murashov. This may be due to a decrease in shadow wages and non-indexation of salaries in the public sector, which is why the contribution of the consumer factor to price growth is practically negative, Murashov believes.

The slowdown in price growth is not surprising, says Deutsche Bank economist Elina Rybakova. This is a natural result of structural changes - low demand, tight monetary policy, reduction in government spending. But inflation could still exceed 4% due to a shortage in the labor market and high inflation expectations among the population, the Central Bank warned in December. Expectations, however, are very different from real inflation: in November, Russians, according to a survey by the Central Bank and InFOM, expected prices to rise in the coming year at the level of 8.7% (another visible oddity).

In fact, such a difference between the expectations of the population and the actual situation is logical, Rybakova notes: people need to get used to such a slow rise in prices. In addition, there are paradoxes of perception, for example, when asked about the expected level of inflation, respondents can name 9%, but answer affirmatively to the question of whether they expect inflation to be at the same level as now.

Oil independence of the ruble

If two years ago the ruble habitually fluctuated in unison with oil (weakened when oil became cheaper and strengthened when it became more expensive), now this dependence has decreased. Two years ago, the correlation between the ruble and oil was approximately 80%, and in recent months has dropped to approximately 30%. In November, the 30-day correlation between the ruble and Brent oil even briefly became negative (asset values ​​move in different directions).

Analysts at Danske Bank expect that the correlation will soon recover somewhat, which is why the Russian currency, with more expensive oil, will even strengthen to 53.5 rubles. per dollar by the end of 2018 (forecast from December 18). However, such a positive forecast for the ruble is rather atypical for the market - the Bloomberg consensus forecast for next year is 58-59 rubles. for a dollar.

The budget rule (a mechanism for purchasing foreign currency with excess oil revenues above $40) helped reduce the dependence of the Russian currency on the main export product, Finance Minister Anton Siluanov has repeatedly said. Next year, foreign currency purchases may increase.

Banks are growing despite the bailouts

The banking sector was shaken by announcements of reorganizations, the peak of which occurred in the third quarter (Otkrytie, B&N Bank). This is impossible to believe if you look only at Rosstat statistics on GDP produced: in the third quarter, the financial and insurance industry added 5.1% year on year - the highest growth among all industries. In the second quarter, the financial sector grew by 2.7%, in the first - by only 0.1%.

It is worth making allowance for the relatively modest size of the financial and insurance sector, according to Rosstat. Because of this, the industry’s contribution to GDP growth in the third quarter (1.8%) was only 0.2 percentage points. Nevertheless, it is no coincidence that the financial sector has become a leader in growth, according to VTB Capital: the advantages of the industry are that it is “not limited by capacity (increasing added value does not require additional labor resources and investments in fixed capital).”

Income paradox

The growth of real wages of Russians this year has become stable, but has not led to the recovery of a more important indicator - real incomes. In January-November, inflation-adjusted wages of the population increased by 3.2%, and real disposable income (those remaining after paying all mandatory payments) decreased by 1.4%.

Revenues have been falling non-stop for two years, with the exception of one month - in January 2017 they jumped by 8.8%. The explanation is simple: then the government paid pensioners a one-time payment of 5 thousand rubles. (compensation for the fact that pensions were not indexed).

Publication date
Monday, 04/23/2018

Authors
Abramov A., Avraamova E., Aksenov I., Arlashkin I., Baeva M., Balandina G., Barbashova N., Barinova V., Belev S., Belyakov S., Bobylev Yu., Bozhechkova A., Burdyak A ., Volovik N., Gataulina E., Grishina E., Dezhina I., Deryugin A., Deshko M., Eliseeva M., Zatsepin V., Zemtsov S., Izryadnova O., Kazenin K., Kiyutsevskaya A., Klyachko T., Knobel A., Kuzyk M., Loginov D., Lyashok V., Maleva T., Malginov G., Mamedov A., Mau V., Mkrtchyan N., Polezhaeva N., Polyakova A., Radygin A. ., Semionova E., Simachev Y., Sokolov I., Sternik S., Tishchenko T., Tokareva G., Trunin P., Uzun V., Florinskaya Y., Khromov M., Tsareva Y., Tsukhlo S., Tsymbal V., Chernova M., Shagaida N., Shadrin A., Yanbykh R.

Series
Russian economy. Trends and prospects

annotation

The review of the Russian economy for 2017 traditionally for the Gaidar Institute includes an analysis of a wide range of structural, institutional and sectoral problems, reflecting both current and trend components of socio-economic development. At the same time, 2017 is characterized by partially contradictory trends: the transition of the economic dynamics of the Russian Federation into a positive phase with increased uncertainty caused by the simultaneous acceleration of technological innovation and the deterioration of the foreign policy situation.

Reviews “Russian Economy. Trends and Prospects” has been published by the Gaidar Institute since 1991, this review is already the 39th issue.

1.1. Global trends and challenges 15
1.2. Socio-economic policy of Russia 25
1.3. Conclusions regarding further development 34

2.1. Monetary Policy 37
2.1.1. Monetary Policy Direction 37
2.1.2. Money market 35
2.1.3. Inflationary processes 47
2.1.4. Balance of payments and exchange rate of the ruble 50
2.2. Fiscal (fiscal) policy 57
2.2.1. Characteristics of budgets of the budget system of the Russian Federation 57
2.2.2. Characteristics of the federal budget 66
2.2.3. Interbudgetary relations and subnational finances 73

3.1. Stock market recovery 83
3.2. Stock market 90
3.3. Non-government bond market 107
3.4. Government bond market 122
3.5. Derivatives market 129
3.6. Financial intermediaries and exchange infrastructure 131
3.7. Investors in the domestic stock market 134
3.8. Risks of the Russian financial market 142
3.9. Market of municipal and subfederal borrowings 146
3.9.1. Market development dynamics 146
3.9.2. Structure of borrowings of constituent entities of the Russian Federation and municipalities 151
3.9.3. Domestic bond loans 152
3.10. Russian banking sector 157
3.10.1. Main indicators of development of the banking sector 157
3.10.2. Updating the regulation of procedures for resolving troubled banks 157
3.10.3. Financial result of the banking sector 159
3.10.4. Interaction between banks and households 162
3.10.5. Bank credit as the main source of financing for the non-financial sector of the Russian economy 164

4.1. Macrostructure of production 167
4.1.1. Dynamics of the Russian economy in 2017: internal and external demand 167
4.1.2. Use of GDP in 2014–2017: consumer and investment demand 174
4.1.3. Changes in the structure of GDP formation by sources of income 177
4.1.4. Dynamics and structure of production by type of economic activity 180
4.2. Russian industrial enterprises in 2017 (based on survey materials) 183
4.2.1. Russian industry in 2015–2017 – enterprise valuation 186
4.2.2. Russian industry in the first half of 2017 190
4.2.3. Russian industry in the 2nd half of 2017 193
4.2.4. Import substitution in Russian industry 196
4.3. The public sector of the Russian economy: scale and dynamics 201
4.3.1. Assessment of the contribution to the economy of companies with state participation 202
4.3.2. Assessment of the contribution of companies with state participation to GDP 213
4.3.3. General Government Sector Assessment 219
4.3.4. Summary assessment of the public sector of the Russian economy 225
4.4. Small and medium-sized businesses in the Russian economy 232
4.4.1. Dynamics of key indicators of small and medium-sized businesses 232
4.4.2. Measures to support small and medium-sized businesses in Russia 241
4.5. Investments in fixed capital 247
4.5.1. Investment resources 249
4.5.2. Financing of investments in fixed capital by sources and forms of ownership 251
4.5.3. Use of investments in areas: reproduction structure 254
4.5.4. Investment financing by type of economic activity 256
4.6. Oil and gas sector 258
4.6.1. Dynamics of world oil and gas prices 258
4.6.2. Dynamics and structure of production in the oil and gas sector 260
4.6.3. Dynamics and structure of oil and gas exports 263
4.6.4. Dynamics of prices for energy products on the domestic market 264
4.6.5. Prospects for the development of the Russian oil sector 267
4.7. Results of 2017 in agriculture and new developments in agricultural policy 268
4.7.1. Dynamics of agricultural production 268
4.7.2. State support for agriculture 272
4.7.3. Food security 279
4.7.4. Conclusions and recommendations 282
4.8. Foreign trade 283
4.8.1. State of the world economy 283
4.8.2. Conditions of Russian foreign trade: price conditions for the main goods of Russian export and import 287
4.8.3. Main indicators of Russian foreign trade 290
4.8.4. Geographical structure of Russian foreign trade 296
4.8.5. Regulation of Russian foreign trade 298
4.8.6. Integration processes 303
4.8.7. WTO Trade Facilitation Agreement 305
4.9. Russia's use of mechanisms for resolving trade disputes within the WTO 306
4.9.1. Changes in 2017 in WTO trade disputes in which Russia participates as a plaintiff 308
4.9.2. Changes in 2017 in WTO trade disputes in which Russia participates as a defendant 310
4.9.3. Changes in 2017 on WTO trade disputes in which Russia participates as a third party 314

5.1. Situation of the household sector: personal income and consumer market 325
5.1.1. Income, poverty and inequality of the population 325
5.1.2. Retail trade turnover and consumer price index 330
5.1.3. Consumer lending 333
5.2. Labor market 336
5.3. Social well-being of the population 339
5.3.1. Assessment of changes in the economic situation 339
5.3.2. Adaptive behavior of the population 342
5.3.3. Social Expectations 344
5.4. Migration processes 346
5.4.1. Long-term migration 346
5.4.2. Temporary migration 349
5.5. The state of the education system in the Russian Federation in 2017 351
5.5.1. Preschool education 352
5.5.2. General (school) education 353
5.5.3. Additional education for children 355
5.5.4. Secondary vocational education 357
5.5.5. Higher education 358
5.5.6. Additional professional education 358
5.5.7. Budget financing of education 360
5.6. Housing market of Russian cities in 2017 362
5.6.1. Dynamics of prices for residential real estate 363
5.6.2. Housing market in the capital region: price dynamics and market activity 367
5.6.3. Construction, commissioning and supply of new housing 373
5.6.4. Moscow housing market forecast for 2018 380

6.1. State property and privatization policy 383
6.1.1. Societies and organizations in federal ownership: quantitative dynamics 383
6.1.2. Privatization policy 390
6.1.3. Innovations in privatization legislation 395
6.1.4. Managing Public Sector Entities 405
6.1.5. Improving the legal regulation of the activities of state organizations of federal property 413
6.1.6. Budgetary effect of state property policy 427
6.1.7. New edition of the state program “Federal Property Management”: interim results and prospects for implementation 435
6.2. Compliance with the Corporate Governance Code in Russia: are there any improvements? 452
6.2.1. Dissemination of corporate governance codes around the world 452
6.2.2. Innovations of the Russian Corporate Governance Code 453
6.2.3. Comply or Explain Approach 456
6.2.4. Compliance of company practices with corporate governance codes abroad 461
6.2.5. Analysis of compliance of company practices with the Corporate Governance Code in Russia 466
6.3. State of science and innovation 478
6.3.1. Priorities of state policy in the field of science and technology 479
6.3.2. Science in universities: achievements and problems 485
6.3.3. The situation in academic science 492
6.3.4. Policies for stimulating technological innovation 496
6.4. State stimulation of research and innovation activities of universities: main tools, scope and beneficiaries of support 502
6.4.1. Research and innovation activities of universities: current situation and development trends 502
6.4.2. Main instruments of state stimulation of research and innovation activities of universities 509
6.4.3. Key directions, scope and features of the implemented policy of state stimulation of the development of research and innovation activities of universities 531
6.5. North Caucasus in 2017: main development trends 538
6.5.1. Federal development program of the North Caucasian Federal District: shifting priorities? 538
6.5.2. The problem of debts for gas and electricity 540
6.5.3. Conflicts at the municipal level 541
6.6. Military economy and military reform in Russia 543
6.6.1. Military personnel and social policy 543
6.6.2. Military-technical policy 545
6.6.3. Military-financial policy 547