Translated material
The year of great change
Russia finds itself in a new economic reality
In 2009, Russia will face a deficit budget for the first time in the last ten years, presidential economic aide Arkady Dvorkovich admitted yesterday. The state promises to fulfill the social obligations undertaken earlier; the Reserve Fund is expected to last for at least one year; if necessary, the authorities are ready to increase the public debt. But the fact itself is indicative - the era of budget surpluses as a symbol of growth and development has passed. How has the era of rapid growth in the country's incomes passed due to record world energy prices?According to preliminary estimates from sources in the Ministry of Finance and the Ministry of Economic Development, the Russian budget deficit in 2009 could amount to 3-6% of GDP. At the same time, the state treasury may lose about 32% of revenues, or approximately 3.5 trillion rubles. For comparison: the size of the Reserve Fund as of December 1, 2008 amounted to 3.661 trillion rubles.
It is already obvious that 2008 was a year of trend reversal: rapid growth gave way to stagnation by the end of the year and the threat of recession in the future. What do you remember about the past 12 months? Of course, due to the global crisis and yet another overfulfillment of inflation plans. Perhaps for the first time in many years, there was an underfulfillment of the GDP growth forecast, a banking crisis, the collapse of Russian stock markets, devaluation of the national currency, trillions of government rubles generously distributed to businesses, and a premonition of tax reform.
The last decade can be called a prolonged vacation for the Russian authorities: in fact, the economy grew and developed without much help from the state. Thanks to the impetus given by the devaluation of the ruble in 1998, and then supported by ever-increasing world oil prices, the Russian economy showed high (some say too high) growth rates. At the peak of the growing budget surplus, positive balance of payments and personal income, the government could allow ambitious goals - doubling GDP, large investment projects, and the formation of a full-fledged middle class. In recent years, the government itself has been more focused on consolidating assets in its hands under the auspices of state corporations and state-owned companies.
One of the development goals was the large-scale integration of the Russian economy into the world one. Integration, thanks to which we could actually talk with Europe on almost equal terms - from the position of a “great oil and gas power”, brought other fruits: the global crisis also became a national disaster.
According to the 2008 budget adopted at the end of last year, inflation this year should not exceed 7%, and GDP growth should reach 7.8%. But if the forecast for economic growth was confirmed for a long time, then the inflation indicators had to be revised, and more than once: the forecast was gradually raised: 8.5% - 10.5% - 11.8% - 13.5%.
Socio-economic indicators in a monthly presentation for 2008 make it possible to clearly see when the economy moved from overheating, with all its pros and cons, to stagnation. This happened in June. This month, for the first time, inflation did not exceed 1% - more precisely, it stayed at this level and then never went beyond this limit. As of December 22, price growth reached 13.1%. And GDP growth fell to below 7% compared to the same period of the previous year. Only in August it was exactly 7%, and in September - 7.1%, which, however, did not save the situation. As a result, GDP growth will be significantly lower than forecast - at the level of 6% by the end of the year.
Even in the middle of the year, there were still unfounded hopes that accumulated reserves and high oil prices would allow us to avoid the most serious consequences. But it seems that the government also relied on factors beyond its control and did not make proactive efforts to maintain its gains.
“The global economic crisis, which is just unfolding, has shown the exhaustion of the growth model of the Russian economy that we had in previous years,” Elvira Nabiullina, head of the Ministry of Economic Development, said in November. According to her, this model was built on high oil prices, which have tripled in the last five years alone, as well as on the availability of cheap “long-term” money for Russian banks and enterprises abroad. “This model was not very sustainable,” the minister admitted, once again citing the low diversification of the domestic economy, dependence on the export of several industries, and insufficient development of its own financial market.
The realization that all of the above needs to be changed did not come at the best time. But the government was forced to begin solving the problems that had accumulated during more stable and prosperous times.
Beginning in the fall, the government had to solve more urgent problems - default on the external debts of private companies and a full-scale banking crisis threatened. The answer to these, as it was fashionable to say, “challenges” seemed obvious: the size of the injection of public money into the economy came very close to the volume of the federal budget expenditures. At the same time, a new growth model for the Russian economy has not yet clearly emerged.
“The very statement that we had a “growth model” seems to me an exaggeration,” says Elena Matrosova, director of the Center for Macroeconomic Forecasting at BDO Unicon. “We didn’t have a model, we didn’t have a national idea, we just floated with the flow of the “oil river.” Now it has become shallow, and we need to look for other ways to move. For some time yet, we will be able to move forward on the “donkey” that has been fattened during the period of prosperity - gold and foreign exchange reserves and accumulated funds. But all these are miraculous sources sent from the Lord God and world markets; we have never really created anything of our own.”
According to the expert, it is difficult to isolate and record any obvious miscalculations of the authorities: “The main drawback of the current management system can be called the absence of a full-fledged “think tank” engaged exclusively in analysis and qualitative forecasting, and not in the administration of the economy. It's not a matter of having to change forecasts every three months. We are treating the disease, but we need to deal with its prevention. Business processes, including at the state level, should be configured not to “fight against...”, but to create.” Unfortunately, the expert notes, we are still far from this.
The chief economist of Troika Dialog, Evgeniy Gavrilenkov, agrees that management’s efforts were directed towards the wrong vector of development. “The economy has become more regulated,” Mr. Gavrilenkov believes, which is not good: at the same time, the quality of macroeconomic policy has deteriorated. "Regulating when things are going up is one thing and doesn't require much effort, but when things are going down you need more skillful approaches," he says.
“If we talk about changing the model, the previous one was characterized primarily not only by rising oil prices, but also by significant government support. At the same time, the economy grew more efficiently until 2003, when the oil price was $20,” says Mr. Gavrilenkov.
“This year it became clear that prosperity was a fiction, it was based solely on expensive oil, it was gone - it was all over in three months,” says Mikhail Delyagin, director of the Institute of Globalization Problems. “Today’s macroeconomic policies are copied from the 1990s, and the result will be the same as in 1998, only this time the default will be on corporate obligations, not on government ones,” Mr. Delyagin believes. What is needed, he believes, is a radical change in the model - a transition from liberal fundamentalism to responsible government regulation and stimulation of government demand. “The state has a unique opportunity to print money, and in our case this will not be an inflationary issue; the money supply has been catastrophically shrinking in recent months,” the economist believes. But for the emission to be effective, it is necessary, firstly, to limit corruption, “so that the money is not stolen,” and, secondly, to limit the growth of monopolies, “so that the injections do not result in rising prices.”