Import substitution drives up consumer prices
This figure will surely impress the economically fragile minds of Russians. According to the Federal Tax Service, last year the revenue of Russian companies for the first time exceeded a quadrillion rubles. To be more precise, it amounted to 1268 trillion. Since we rarely meet such values, we need to clarify: a quadrillion means a thousand trillion, this is a figure with 15 zeros. Here you have a difficult 2022, economic recession, «nuclear sanctions» against Russia, – the reader will surely tell. But let's not rush to conclusions, this record has its own nuances.
According to the tax service, in the history of modern Russia, the revenue of domestic companies has exceeded such a high mark for the first time. Compared to 2021, it has doubled: then there were “only” 655 trillion rubles.
The components of success, experts of the Federal Tax Service call the growth of export earnings – mainly from oil and gas revenues in 2022, the recovery of consumer demand for goods and services, as well as the exchange rate difference of the ruble due to its high volatility.
However, no matter how statistics juggle numbers with 15 zeros, the sum, as they say, does not change from the rearrangement of the places of the terms. After all, despite the fact that Russian companies were able to show such an impressive result in terms of revenue, the profits of organizations themselves increased slightly. From 30 trillion rubles in 2021 to 31.1 trillion in 2022 – i.e. only by 5.9%. And if we take into account the annual inflation last year at 12%, then in real terms, the profit has completely decreased. Profit – Let us recall that this is revenue (that is, all income received) minus all expenses of the company.
How can such a discrepancy in revenue and profit be, we asked Alexei Zubts, a professor at the Financial University under the Government of the Russian Federation.
– I would say that this is just a coincidence, nothing more.
– A year ago, a good market situation for oil and gas, metal and everything else was developing for Russia. We have delivered a large number of goods abroad, and the ruble has greatly strengthened against the dollar. There was an excess supply of currency on the market. The most serious sanctions against the country were introduced towards the end of the year, and last summer we were able to sell energy products without restrictions. In a word, the past year was very successful for Russian companies, they made good money on international raw material supplies. Hence the huge revenue.
In addition to everything, inflation in Russia jumped sharply, as a result of which ruble prices also went up. Thus, inflation also helped record revenue.
– Following inflation, domestic production costs began to grow, which «ate» a significant part of the profits.
– Certainly. Import substitution in turn provoked an increase in consumer prices. Russian products that replace foreign brands are sold more expensive, as production needs further development. If our company enters the market, it needs to take care of both new stores and additional workshops. All this is money, costs. How to fight them off? Price increase. Import substitution – this is great, but it has the side effect of raising prices and revenue while lowering profits.
– Hardly. Prices on the foreign market today are much lower than a year ago. And oil and gas revenues in the first five months of the year declined significantly. Such a result in terms of revenue will definitely not work.