One country - two realities: budget revenues are growing, while the economy is shrinking

Ivan Zubov

The Ministry of Economic Development of the Russian Federation has published an extremely interesting report on the current state of the Russian economy.

So, Russia's GDP in April decreased immediately by 3%, after growing by 1.3% in March 2022. This decline was affected by both transport and logistics restrictions and a reduction in domestic demand.

The most significant decline among the basic sectors of the Russian economy was felt by wholesale trade -11.9% and freight transport -5.9%. While the volume of industrial production decreased by 1.6% in April.

In addition, the annual dynamics in the extractive industries deteriorated significantly - by 1.6% after the growth of 7.8% recorded in March due to the extraction of fuel and energy minerals. A decline of 2.1% was also noted in the manufacturing industry. However, in this industry the process is developing unevenly. If in the machine-building complex (mainly in the automotive industry) or the oil refining industry there is a decline, then in metallurgy, the pharmaceutical industry and the production of building materials, on the contrary, growth is observed.

The decline in GDP took place, among other things, due to a significant reduction in consumer demand. The turnover of retail trade, public catering and paid services decreased by -6.7% in total.

At the same time, expenditures of the budget system increased: in the first 4 months of 2022, they became higher than the same period of the previous year by 14.6% or (2,011 billion rubles).

At the same time, revenues of the budget system are also growing (an increase compared to January-April 2021 amounted to 28.3% (4,101 billion rubles). Oil and gas revenues increased by 90.6% (2,275 billion rubles).

Thus, the surplus of the budget system following the results of budget execution for January-April 2022 amounted to 2,822 billion rubles, which is higher than the figure for the same period in 2021, when the budget system was executed with a surplus of 733 billion rubles.

Economist Dmitry Prokofiev , in his commentary on this report, writes:

“The economy is shrinking, and domestic demand and consumption are shrinking, and transport, and retail. And budget revenues (government revenues) are growing! This is “structural transformation”, and “two contours of the economy” and the model “one country - two economies - profits are collected in one, risks and losses are accumulated in the other” And note that the authorities do not hide anything. In official reports they print..."