Russian economy in crisis: everything is lost, but everyone is happy

Yekaterina Maksimova

According to the stress scenario, the publication reports, the country's economy will return to the level of February 2022 only at the end of the decade. And even later. In 2023, the decline in GDP may be 8.3% relative to the level of 2021, and in 2024 GDP will collapse by 11.9%.

The stress scenario assumes the prolongation of sanctions and the preservation of restrictive measures, a decrease in production in export-oriented industries, and a reduction in gas and oil supplies. The mere zeroing of gas exports to Europe will result in a loss of 400 billion rubles for Russia in the form of lost tax revenues.

At the end of the summer, the Ministry of Economic Development and the Central Bank of the Russian Federation presented their forecasts for the coming years of crisis. Both federal structures promise the Russians a difficult year in 2023, but they believe that the situation will begin to stabilize after that.

Thus, according to the Ministry of Economic Development, the economic recession in 2022 is expected at the level of 4.2%. The department predicts a reduction in GDP at the level of 7.8%. From 2024, the Ministry of Economic Development expects the economy to grow by 3.7%, and in 2025 growth will be 2.6%. The most critical period, according to the department, will be the first and second quarters of 2023.

The Central Bank presented three scenarios until 2025 - the baseline, the global crisis and accelerated adaptation. The first option assumes that in 2022 and during most of 2023 the Russian economy will contract, and in 2025 it will return to a potential growth rate of 1.5-2.5%. The scenario of the global crisis implies a recession of the Russian economy until 2024 inclusive.

Since February, Russian economists have voiced dozens of their predictions about what awaits the Russian economy in the coming years. Sometimes experts contradict each other.

Doctor of Economics, Chief Researcher at the Institute of the Russian Academy of Sciences Igor Nikolaev is sure that the crisis that began in 2022 will not be like all the previous "falls" that Russia experienced in the 21st century.

He recalled that the country's GDP fell in 2009, 2015 and in the pandemic year 2020. And the real incomes of the population - one of the key indicators of the economy - decreased by more than 6% from 2014 to 2021 inclusive.

“And then it all ended in one year. And now it is clear that this crisis is dragging on, and a protracted crisis is not at all like a short-term one. The hardest is yet to come,” Nikolaev assessed the prospects for Russia during his speech at the press center of the Public News Service.

Academician of the Russian Academy of Sciences, Doctor of Economics Abel Aganbegyan, in an interview with Novye Izvestia, also predicted that the current crisis would be much deeper than in 1998-1999. And the crisis of 2008-2009, when GDP fell by almost 8%. And this crisis will be three times deeper than the recession of 2015 and the recession in 2020 due to the coronavirus pandemic. And there, and there the GDP decreased by only 3%.

The reduction of GDP, the scientist believes, may be 10%. Economist Aganbegyan gives different figures regarding the decline in real incomes of the population. In 2014-2019, they decreased not by 6%, but by about 10%. In 2020, due to the pandemic, they decreased by another 3.5%. But in 2021, the level of real income was 1% higher than the level of 2019. But from the second quarter of 2022, real incomes will decrease by another 10%. As a result, they will be 20% below the level of 2012 and 2013. Accordingly, the final consumption of households will also decrease significantly.

Aleksey Zubets, director of the Institute for Social and Economic Research of the Financial University under the Government of the Russian Federation, calls for focusing on other figures - optimistic ones, which indicate that the country's economy is taking a hit.

The expert, who entered into a dialogue with Igor Nikolaev, recalls that the fall in industrial production in the first quarter was less than 2%. It is clear that the effect of the first two months of 2022, when the main economic indicators showed positive dynamics, had an effect, but nevertheless. The fall in real incomes of the population in the third quarter was also insignificant - about 2%. Aleksey Zubets, assessing the mood of the Russians, referred to the results of summer sociological surveys.

“In the country, protest activity is at the level of the plinth. The number of fears that are in the minds of the population is also at a level that is significantly lower than the figure for the same period last year. The number of those who are satisfied with life today in Russia is 75% or so. That is, three-quarters of the country's population is satisfied with life. I assure you, there would not be such a number of people who are satisfied with their lives if it were not for the acceptable economic situation in the country,” said Mr. Zubets, who represents the Financial University under the Government of the Russian Federation.