Crazy Budget - 2022: More Missiles, Less Revenues, and Greater Propaganda

Elena Ivanova, Natalia Seibil

Budget and oil prices

After tightening their belts and rolling up their sleeves over the past two years of the pandemic, the government has been expecting a more ambitious economic recovery plan. But instead of a growth budget, we got a normalization budget. It is obvious to experts that the budget will not be a key source of economic growth in the next three years. So, hiding behind definitions, the authorities say that they are not interested in economic growth now. The fact that the economy in the country began to grow is not the merit of the government, but the result of the rise in oil and gas prices after the pandemic. In early 2020, oil prices fell sharply, in the middle of this year they rose just as sharply. As a result, the share of oil and gas revenues for 2022 will grow by 2.5% - from 35.6% to 38.1% . The problem is that everything happens very quickly, says Andrey Vernikov , head of the investment analysis and training department at UNIVER Capital:

- Nobody expected this. Easy money fell. Meanwhile, the rise in oil prices does not in any way lead to the strengthening of the ruble. Prices could drop a little if, as before, the ruble strengthened. But now, due to the fiscal rule, there is no correlation between the increase in oil prices and the strengthening of the ruble. This dependence was removed. The ruble is not strengthening, prices are not falling. Such an idiotic situation.

Previously, the ruble exchange rate was highly dependent on the oil price. Now this is not, but it has not become better. In such a situation, the possibilities of imports are sharply reduced, so that slipping off the oil needle is postponed. But this is not the only negative point, says Alexander Shirov , director of the Institute for Economic Forecasting of the Russian Academy of Sciences:

“I don’t know if this is good or bad, because it reduces our ability to buy imported equipment and so on. Plus leads to an increase in domestic prices for a number of items - food, motor fuel, metal, chemical products. This is a wide range of goods, which depends on the prices of the world market. And if the exchange rate does not strengthen, then prices rise. Everyone can see it.

No one will refuse extra money to the budget, even if it smells of oil. But they only increase the base for the economy; oil revenues cannot become the engine of growth. But even they will not go to the economy, as in previous years, they will go to the National Welfare Fund. Almost 15 trillion rubles are already stored there. Apparently, for the government, the decline in incomes of the population for the 11th year in a row is not an argument to spend out of the box.

Throwing has been going on in the country since 2003. Is Russia an energy superpower? Or maybe she is Skolkovo? Now these reflections seem to be over. Andrey Vernikov reminds:

- Any restructuring of the world's economy is likely to end in failure. Most of the examples are unsuccessful. So why should the authorities take risks? What's the point? The era of oil, according to OPEC, will end only in the 30s, the era of gas will end in the 40s. Almost twenty years left. In this situation, why chase a crane - a high-tech economy - with such and such a tit!

Social payments and pensions

In 2022, the government is cutting spending on social policy and pensions. Sotsialka will be cut by 6%, pensions - by 4.5%, and medical expenses will also be cut.

With the reduction of pensions, everything is more or less clear. In 2021, the number of pensioners in the country decreased by 600 thousand people. As the numbers of people infected with covid grow, the number of deaths per day breaks all records, and it is the old people who die, there are reserves for saving on this item.

Why, in the ongoing pandemic, medical costs are being cut is a more complicated question. On the one hand, the reduction is taking place against the background of the fact that they were increased in 2020 and 2021.

- On the other hand, we see that the pandemic continues, and it is difficult to say how correct the cuts in health care and social support are in these conditions. But we must bear in mind that our budget is always formed with a certain reservation. If the situation remains difficult in the field of healthcare and social policy, there is an opportunity to increase spending in 2022, '' reassures Alexander Shirov.

Financial analyst Mikhail Belyaev agrees with him. The budget, he says, has border zones. Direct health care costs are not all the money the government spends on maintaining the health of the population. Considerable expenses are buried in those items that relate to other sections of the economy.

Andrey Vernikov has a different explanation, which you believe right away:

- There are reports that the reform of medicine has been successful, everything has been optimized. Telemedicine does not require such an infusion. Probably, this is how it is reported upstairs. Nobody knows what's going on. The situation within the Garden Ring, in Kazan and St. Petersburg is understandable. And the fact that outside these regions medicine has ended, few people guess about it. For example, in Stavropol, doctors no longer go door to door, but no one knows about this.

But with pensions and a living wage, there is complete clarity. With inflation in 2021 at 8%, the indexation of the basic pension is planned at 5.9%. The minimum wage will grow by 6.4%, and the cost of living - by 2.5%.

There are 40 million pension recipients in Russia. A third of the population is scheduled to lose income in 2022. Mikhail Belyaev calls the Finance Ministry's plans a "flaw," although he has a completely different word in mind:

- The increase in pensions by no means keeps pace with inflation, especially the inflation that concerns consumer goods and the spectrum that pensioners use. For them, this is a significant blow, and here the Ministry of Finance ignores the danger zone.

The country's financial authorities, when indexing pensions, take general inflation as a starting point, and it includes a huge range of goods that do not rise in price as quickly as, for example, food. Pensioners consume 30-40 basic necessities from this list, so prices in this group are increasing much faster.

- In many countries, inflation is calculated for several groups of goods. There is wholesale inflation, there is inflation for a broader link. It would be possible to introduce the concept of social inflation and focus on it. It is clear that the Ministry of Finance is unlikely to like this idea, so our indexation of pensions lags behind the actual rise in prices.

The government preferred not a systematic increase in the income of pensioners, but one-time payments. As it happened, we saw both years of the pandemic. Moreover, the payments were used for all sorts of political tasks, be it a new Constitution or elections to the State Duma. They also did not cover inflation.

And this time, knowing the handwriting of the Ministry of Finance, says Mikhail Belyaev , these payments are unlikely to be especially luxurious.

True, there is still a law. According to it, the state is obliged to index pensions not lower than inflation. Therefore, as part of adjusting the budget allocation, the missing interest will be paid. Alexander Shirov believes that this will not be enough either:

- This year inflation was high, we had one-time payments to pensioners and families with children. Whether these one-time payments will be made next year or not is a question for the real income of pensioners and families with children. If these 10-15 thousand rubles are not paid next year, then even taking into account the indexation, real incomes will be lower than in 2021. The problem with these one-time payments is that they either need to be carried out annually, or a situation will result in a decrease in the RRD of these population groups.

Defense and propaganda

The state still spares no money for the defense industry and funding for state-owned media. Exactly how much the country will spend on guns and tanks is unknown. The budget items for this are classified. But it was announced that the expenditures under the section "National Defense" will exceed the expenditures under the section "National Economy" and will amount to 15% of the total expenditures. After the crisis, defense spending was cut for three years in a row, now they have returned to pre-crisis levels, experts say. It turned out that at such a level of expenses, it is impossible to update military equipment.

The state media were also lucky this year. On RT, which works for a foreign audience, they will spend 4.5% more than this year. And VGTRK will increase its funding by a third, or 33%. Thus, the total budget of state media in the country will amount to 90 billion rubles, which, according to Yandex Zen , is equal to the annual budget of 4 Russian cities with a population of over one million.

Whether the state-run channels have run out of money in the elections, or whether we are again waiting for changes that require information support, it is difficult to say. But the fact remains: the government does not mind any money for TV.