Formal indicators of improvement should be treated with caution
Today, the Russian economy looks very good in terms of formal statistical indicators. The picture looks something like this: the economy has withstood the sanctions, unemployment is at a record low, inflation is getting lower and lower…
Even international organizations, such as the International Monetary Fund, are correcting their forecasts for the Russian economy for the better. The latest (April) improvement in the forecast by the IMF — up to plus 0.7% growth of the Russian economy in terms of GDP in 2023 compared to plus 0.3% in January — made a strong impression on Russian officials, who began to use this fact almost in as the main argument in favor of the fact that everything is fine with us.
For the sake of objectivity, it must be said that the Russian economy really has something that can characterize it with a plus sign. The decline in GDP at the end of 2022 amounted to 2.1%, although in the spring of that year the forecasts were much more pessimistic: minus 7–8%, or even up to 10%, a decline in GDP was expected. Today, recalling those forecasts, they say that only “some experts” expected such figures. However, I would like to remind you that the spring forecast of the Bank of Russia for 2022 also pointed to a strong expected fall in GDP in the range of 8–10%. The Bank of Russia, you see, is not just some “some experts”. So those predictions were quite justified.
Why did the economic results of 2022 turn out to be better than expected for Russia? It is also understandable: oil prices rose sharply, which allowed for record export earnings; private business has shown its resilience by demonstrating the potential for adaptability; a number of government measures and decisions of the Bank of Russia were truly timely and effective (for example, allowing parallel imports, etc.). But even so, a 2.1% decline in GDP in 2022 is still a noticeable drop. This is an indication that the economy is in crisis. And this indicator in 2022, I note, was almost 8 percentage points worse compared to what happened with the economy in 2021, when GDP growth was 5.6%. If you don’t want to compare with 2021, then compare with the official forecast with which the economy entered 2022 (plus 3% in GDP). And in this case, it is obvious that there are problems with the economy.
Okay, 2022 is already history. What can make us happy today? It would seem that there is something. Everyone has probably already heard how low the unemployment rate in Russia is today. Indeed, the total number of unemployed in the country in February 2023 decreased, according to Rosstat, to 2.6 million people. This is a record low. This has never happened in the recent economic history of Russia. However, the reasons why the unemployment rate is so low today are on the surface: there is a shortage of personnel almost everywhere. There are several reasons for this deficit: demographic problems, a radical decline in the influx of migrants, and the impact of the current acute geopolitical conflict.
It turns out that low unemployment is, rather, not an indicator of today's economic well-being in Russia, but an indicator of how great a shortage of personnel is, which is a powerful deterrent to economic development. But then it is definitely not worth characterizing low unemployment as an unconditional indicator of economic success.
Even today, one often hears what successes we have achieved in reducing inflation. Thus, according to Rosstat, by the end of April 2023, the price increase since the beginning of the year amounted to about 2%. For comparison: last year over the same period, prices rose by almost 11.7%. There is no doubt that the current situation cannot be compared with what it was in the spring of 2022. Although, of course, subjective sensations from what is happening with prices in stores and with tariffs for services in no way agree with the formal statistical picture.
We will try to keep our own subjective feelings to ourselves, because it is still wrong to rely on them. But, you see, this is very difficult to do, especially after the next visit to the store or, for example, using paid medical services. In order to have confidence in official statistics, I would like to have more information regarding the methodology for calculating the consumer price index. This is not about the official methodology that is published. Not so long ago, for example, there was a lot of talk about the fact that price information needed to calculate inflation rates can be «removed» directly from cash registers. What's going on with this?
Or here's another question: how fully is information taken into account on new services imposed on consumers, on new representative goods for which prices are fixed, on points of collection of such information? We need a comprehensive audit of what and how we are doing with the calculation of the consumer price index. Rosstat has a monopoly in this matter. Apparently, it will remain so, because it is unrealistic to build a parallel system for collecting and processing the necessary information, and it is wrong. But then he himself should be interested so that the trust in official statistical information is at a high level.
It is not necessary to assume that trust is something insignificant, intangible. If confidence in the same official statistical information is not up to par, then this increases the level of uncertainty in the economy. When it is not clear what is happening, how can you plan for investments, consumer spending, and so on? But without all this, one cannot count on sustainable economic development.
Let's look at some more economic indicators. At the end of April 2023, Rosstat published data on the dynamics of industrial production in the first quarter of this year. In general, for the quarter, the volume of industrial production was lower than the same indicator in 2022 by 0.9%. However, in March, the industry even showed growth — by 1.1%, which was received with enthusiasm. Is there any reason for it?
It is necessary to understand, due to what, what industries such an encouraging result was achieved. It turns out that these are manufacturing industries, the output of which in March 2023 was 6.3% higher than the same indicator in 2022, thereby ensuring growth in the industry as a whole. The growth of manufacturing industries today reflects the formation of a mobilization type of economy, when individual industries are able to show really outstanding results, providing an overall positive trend.
Another example: in January-February 2023, the volume of paid services to the population showed an increase of 3.4% compared to the corresponding period in 2022. And this is understandable. Against the backdrop of the removal of covid restrictions, this increase was largely provided by industries that suffered the most during the pandemic from these same restrictions. Thus, in January-February 2023, according to Rosstat, tourism services grew by 13.1% compared to the same indicator in 2022, cultural services — by 35.7% at all, etc.
It is necessary to deal with what provides a fixed dynamics of economic indicators. Today is just such a time when the formal-statistical picture is one, but with the analysis of the reasons, it emerges another. Perhaps, by the way, the picture is reversed, when, it would seem, there are no grounds for optimism, but everything is not so bad. It is necessary to assess the statistics more calmly and more objectively, not exaggerating, but also not underestimating the significance of certain indicators. Today, we are not doing so well with statistics, due to various kinds of restrictions. We will, of course, appreciate what we have, but still try to understand why certain results are obtained.