Grandpa Kudrin's Testaments, or How to Put the Economy on the Brink
Business activity in the Russian industry continues to decline. Moreover, for the second month in a row, the PMI index is kept at a level below fifty points, separating growth from recession.
This information was published by the agency IHS Markit. According to him, the deterioration of the operating environment is observed throughout the industrial sector. The growth rate of output slowed to almost zero and are at the level of two-year lows. And even exports, where there is still some growth in industrial production and orders, are not very encouraging: its rates are the lowest in the last six months.
Among the reasons for this situation is the rise in fuel prices and the rise in prices for imported raw materials and equipment, which significantly increased the costs of producers against the background of almost no increase in consumer purchasing power.
The industry feels worse than in 2016 and 2017, being at the level of business activity at the level of 2015. But it must be remembered that at the 2015 year there was a peak of political and sanction crisis, a collapse in oil prices and much more than at present. moment, geopolitical uncertainty, suggesting relevant risks. Now, after a lot of vigorous reports about the victory of import substitution, the lowest in the newest stories countries of inflation, the implementation of the old May decrees and the more inevitable implementation of the new figures presented look, to put it mildly, unexpectedly.
The Russian economy has one important specific feature: up to 70% of GDP comes from either the public sector or companies with state participation. They are the main investors and the main consumers of the manufacturing industry. Accordingly, the economy feels relatively well when there is enough money in the budgets of all levels. Otherwise, everything changes with the exact opposite, because neither private exporters nor independent producers are able to give the economy so much liquidity to cover the resulting holes.
Paradoxically, the relative budgetary hunger (or rather, the lack of surplus) occurred precisely in the current year, when world oil prices barely fall below 70 dollars, and government revenues are quite high. Although, if you look, there is nothing paradoxical here: the fact is that it is embedded in the very mechanism of the so-called budget rule, which has the force of law and thanks to which we can not significantly increase budget revenues, no matter how well the external economic situation develops and Nor were the prices of our main export products.
What is this very budget rule? In the most general terms, it looks like this: we have a certain principle of the distribution of export oil and gas revenues. According to the rule, only that part of oil revenues that was received at a certain price for oil can be sent to the budget. Everything above is automatically withdrawn to the National Wealth Fund and is placed mainly in the securities of some “partner countries” and their national currencies.
At 2018 year, such a benchmark price is the price of Urals oil in 40 dollars per barrel. Everything that is higher, as already mentioned, is withdrawn from the economy and is directed to “savings”. The quality of this very savings may raise questions, but we will not address this sore subject right now.
The history of the adoption of this mechanism is also quite deep. Without going deep, let's say that in many respects (at least, as for the Russian version of the budget rule), this is the brainchild of “the very best finance minister in the world,” Mr. Kudrin.
When creating this mechanism, the goal of "sterilizing" the excessive, in the opinion of the ingenious bookkeeper, the money supply was almost not concealed. This was supposed to reduce inflationary risks, which, in the opinion of our monetarist ministers, are the main threat to our future prosperity.
Another goal was the formation of large gold and foreign exchange reserves that would allow our economy to go through relatively low oil price cycles without reducing costs for the social obligations of the state and generally allowing for stable financing of the state budget.
And this, in general, is not so stupid. After all, oil prices can really fluctuate significantly, and given the dependence that Russia has in this matter, it would not hurt us to have some “zagashnik”.
The problem, as usual, lay in the fact that the winning monetarists did not know what to do, and the budget rule invented by them quickly became a weight on the feet of the Russian economy. The fact that it needs to be mitigated by reducing the size of the National Welfare Fund, and the size of contributions to it, many said. In particular, Andrei Klepach, Deputy Minister of Economic Development and Trade, spoke on this subject:
This was said to them even before his dismissal from the Ministry of Economic Development and Trade in 2014. As we see, since then the situation has not changed much, and growth in 2-3% is still an unattainable dream for us.
It is also interesting that in the most acute period of the crisis, from 2015 to 2017 inclusively, the budget rule was due to a difficult foreign policy situation, either applied in a very relaxed form, or not at all. That probably made it possible to get through the crisis without any shocking consequences for the economy. But since 2018, we are again living according to the precepts of Kudrin’s grandfather, so forget about oil for 70-80 dollars - it’s like budget for 40, and now we have less money in terms of government spending, investments and subsidies than in 2016 m!
True, in spite of all these severities, all the "sterilization", the draconian policy of the Central Bank and other "targeting", inflation in Russia is once again raising its head. And the state, preoccupied with the interests of oil companies and Gazprom, instead of raising the export duty on crude oil, sluggishly mumble about the need to stop the rise in prices for gasoline and diesel fuel.
What conclusion can be drawn from the incoming information that we seem to have climbed into another economic dead end? Yes, the conclusion is simple: this government has no right to continue working, because it cannot be trusted with any important issue of our economic development. And now, when they are trying to carry out pension reform with the hands of Medvedev and Siluanov, this is more relevant than ever: surely you will have to not only redo, but also correct what they will do.
But the current deadlock has one important difference from the previous ones. The fact is that before our pseudo-economists constantly had some kind of excuse for their lack of penance. And the main such excuse has always been high inflation. Here, they said, inflation will win soon, and even then! ..
Now we are convinced that the deadlock into which the Russian economy has led is deeper. This is a conceptual deadlock, and the situation cannot be rectified with any half measures. Yes, it is possible to add billions somewhere, but somewhere slightly loosen tightly twisted nuts. But in the end, we still come to where we are now.
Our economy needs not only new personalities, but also new ideas, concepts, and approaches.
And with this quite difficult. How will our next wandering in the three economic pines end? ..
This information was published by the agency IHS Markit. According to him, the deterioration of the operating environment is observed throughout the industrial sector. The growth rate of output slowed to almost zero and are at the level of two-year lows. And even exports, where there is still some growth in industrial production and orders, are not very encouraging: its rates are the lowest in the last six months.
Among the reasons for this situation is the rise in fuel prices and the rise in prices for imported raw materials and equipment, which significantly increased the costs of producers against the background of almost no increase in consumer purchasing power.
The industry feels worse than in 2016 and 2017, being at the level of business activity at the level of 2015. But it must be remembered that at the 2015 year there was a peak of political and sanction crisis, a collapse in oil prices and much more than at present. moment, geopolitical uncertainty, suggesting relevant risks. Now, after a lot of vigorous reports about the victory of import substitution, the lowest in the newest stories countries of inflation, the implementation of the old May decrees and the more inevitable implementation of the new figures presented look, to put it mildly, unexpectedly.
The Russian economy has one important specific feature: up to 70% of GDP comes from either the public sector or companies with state participation. They are the main investors and the main consumers of the manufacturing industry. Accordingly, the economy feels relatively well when there is enough money in the budgets of all levels. Otherwise, everything changes with the exact opposite, because neither private exporters nor independent producers are able to give the economy so much liquidity to cover the resulting holes.
Paradoxically, the relative budgetary hunger (or rather, the lack of surplus) occurred precisely in the current year, when world oil prices barely fall below 70 dollars, and government revenues are quite high. Although, if you look, there is nothing paradoxical here: the fact is that it is embedded in the very mechanism of the so-called budget rule, which has the force of law and thanks to which we can not significantly increase budget revenues, no matter how well the external economic situation develops and Nor were the prices of our main export products.
What is this very budget rule? In the most general terms, it looks like this: we have a certain principle of the distribution of export oil and gas revenues. According to the rule, only that part of oil revenues that was received at a certain price for oil can be sent to the budget. Everything above is automatically withdrawn to the National Wealth Fund and is placed mainly in the securities of some “partner countries” and their national currencies.
At 2018 year, such a benchmark price is the price of Urals oil in 40 dollars per barrel. Everything that is higher, as already mentioned, is withdrawn from the economy and is directed to “savings”. The quality of this very savings may raise questions, but we will not address this sore subject right now.
The history of the adoption of this mechanism is also quite deep. Without going deep, let's say that in many respects (at least, as for the Russian version of the budget rule), this is the brainchild of “the very best finance minister in the world,” Mr. Kudrin.
When creating this mechanism, the goal of "sterilizing" the excessive, in the opinion of the ingenious bookkeeper, the money supply was almost not concealed. This was supposed to reduce inflationary risks, which, in the opinion of our monetarist ministers, are the main threat to our future prosperity.
Another goal was the formation of large gold and foreign exchange reserves that would allow our economy to go through relatively low oil price cycles without reducing costs for the social obligations of the state and generally allowing for stable financing of the state budget.
And this, in general, is not so stupid. After all, oil prices can really fluctuate significantly, and given the dependence that Russia has in this matter, it would not hurt us to have some “zagashnik”.
The problem, as usual, lay in the fact that the winning monetarists did not know what to do, and the budget rule invented by them quickly became a weight on the feet of the Russian economy. The fact that it needs to be mitigated by reducing the size of the National Welfare Fund, and the size of contributions to it, many said. In particular, Andrei Klepach, Deputy Minister of Economic Development and Trade, spoke on this subject:
We must approach to being extremely honest, and then say: yes, we keep the budget rule, but then we must recognize that we will not have high growth rates in the current global situation. The growth rates that we can have are two to three percent.
This was said to them even before his dismissal from the Ministry of Economic Development and Trade in 2014. As we see, since then the situation has not changed much, and growth in 2-3% is still an unattainable dream for us.
It is also interesting that in the most acute period of the crisis, from 2015 to 2017 inclusively, the budget rule was due to a difficult foreign policy situation, either applied in a very relaxed form, or not at all. That probably made it possible to get through the crisis without any shocking consequences for the economy. But since 2018, we are again living according to the precepts of Kudrin’s grandfather, so forget about oil for 70-80 dollars - it’s like budget for 40, and now we have less money in terms of government spending, investments and subsidies than in 2016 m!
True, in spite of all these severities, all the "sterilization", the draconian policy of the Central Bank and other "targeting", inflation in Russia is once again raising its head. And the state, preoccupied with the interests of oil companies and Gazprom, instead of raising the export duty on crude oil, sluggishly mumble about the need to stop the rise in prices for gasoline and diesel fuel.
What conclusion can be drawn from the incoming information that we seem to have climbed into another economic dead end? Yes, the conclusion is simple: this government has no right to continue working, because it cannot be trusted with any important issue of our economic development. And now, when they are trying to carry out pension reform with the hands of Medvedev and Siluanov, this is more relevant than ever: surely you will have to not only redo, but also correct what they will do.
But the current deadlock has one important difference from the previous ones. The fact is that before our pseudo-economists constantly had some kind of excuse for their lack of penance. And the main such excuse has always been high inflation. Here, they said, inflation will win soon, and even then! ..
Now we are convinced that the deadlock into which the Russian economy has led is deeper. This is a conceptual deadlock, and the situation cannot be rectified with any half measures. Yes, it is possible to add billions somewhere, but somewhere slightly loosen tightly twisted nuts. But in the end, we still come to where we are now.
Our economy needs not only new personalities, but also new ideas, concepts, and approaches.
And with this quite difficult. How will our next wandering in the three economic pines end? ..
- Viktor Kuzovkov
- http://www.globallookpress.com/
Information