In general, the economic situation has stabilized, Vladimir Putin said in his speech at the WEF. However, the president added, “we also see problems in a number of industries and regions, at individual enterprises in the country, especially those that were tied to supplies from Europe.” Thus, the president acknowledged a certain duality of what is happening to the Russian economy under the sanctions. But what is there more – signs of stabilization or risks and threats?
According to Putin, inflation has slowed down, and by the second quarter of 2023 it will reach the target level of 4-6%, amounting to 12% by the end of the current year. The currency and financial markets are also stabilized, unemployment in the country is at a historic low – below 4%, the head of state noted during his speech at the plenary session of the Eastern Economic Forum. However, there are problems associated with supplies from abroad.
The President also said that Russia is ready “tomorrow” to resume the operation of Nord Stream 2 and gas supplies to Europe: it is enough “just to press the button.” But Western sanctions prevent it from doing so. According to Putin, Russian pipeline gas is always several orders of magnitude more competitive than LNG imported from overseas. And if the leading European countries believe that they do not need such advantages, “well, it doesn’t bother us in any way, since the need for energy resources in the world is very large.”
“The Ministry of Economic Development in its latest report improved key forecast indicators for 2022, in particular, the GDP decline is expected at 2.9% instead of the previous 4.2%,” says Vladislav Antonov, financial analyst at BitRiver. – Apparently, the president relied on these data.
Inflation of 12% is achievable only if the purchasing power of citizens continues to decline. So far, everything is moving towards this, as wages are stagnating, household spending is not growing. Here you also need to follow the actions of the Central Bank: if the key rate remains at the current level, this will be an additional factor working to ease inflation. But prices are an unpredictable thing, they can block the fall in a moment, jumping to new heights.”
As for the topic of Russian pipeline gas, the president gave a correct assessment: Europe has been receiving cheap raw materials from us for decades and has had significant competitive advantages in the world market. Now, according to Antonov, she is ready to abandon it for political reasons, buy from alternative suppliers at incomparably higher prices, and even put up with the energy crisis on the continent, which she herself provoked.
“Current macroeconomic statistics indicate that the Russian economy has reached a plateau,” says Nikita Maslennikov, a leading expert at the Center for Political Technologies. – There are neither clear signs of its imminent sharp collapse, nor prerequisites for a quick rebound upwards. And this can be called stabilization, with one significant amendment: stabilization (or, if you like, conservation) of the crisis.
We are facing a colossal challenge: there will be no growth unless we fundamentally change the very economic model, institutional policy, and business conditions.
After all, unemployment in our country is becoming more and more structural, here one policy in the employment market will not improve the situation. The government is aware of this in general, but it is unclear what to do specifically. Remember, in Galich: “And they shout to me from the audience – give me the details!” The details are a full-fledged dialogue between the state and business and the population, this is life, not the Kremlin or Krasnopresnensky offices.”
If we talk about inflation, now it is 14.37%. Accordingly, the indicator of 12% at the end of the current year is quite plausible, although there are a lot of circumstances that may prevent it from being achieved.
“The inflation target of 12% is achievable, but this cannot be considered a victory for the country’s leadership. In terms of official statistics, it forgets that the salaries of ordinary Russians are not growing,” says Nikolay Vavilov, an expert in the strategic research department at Total Research. “Consequently, people have to spend more where they did not plan to do so. As a result, the economy slows down. The real consequences of the sanctions will not appear until the second half of 2023.”
It was then, in Vavilov’s opinion, that time bombs would explode in the domestic economy in the form, first of all, of an embargo on energy supplies and a severing of ties with Western technology companies that supplied software and equipment to Russia. And here a collapse is possible, which will not be softened by any gray import.
Domestic pipeline gas is, indeed, economically more profitable for Europeans. It does not need to be transported across the ocean, which means spending money on logistics.
The EU does not have the required amount of LNG infrastructure, and it will take several years to create it. It is almost the same story with oil: most European refineries are tuned specifically for the Russian grade Urals, which has specific grain size, sulfur content, density, and so on.
Reformatting will take at least six months to a year for each refinery, and this is fraught with a halt in production and rising prices.