The Russian economy showed growth again
Following the results of eight months, the Russian economy showed good recovery dynamics. The budget was executed with a surplus of 230 billion rubles, and the consolidated balance of the regions brought about another 140 billion rubles to the treasury. These data were announced on Friday by Prime Minister Mikhail Mishustin at a meeting in the government, where its participants reviewed the country's draft budget for the upcoming three-year period.
Photo: government.ru
The existing risks of the budget deficit exceeding the planned values have noticeably decreased this year; the Government managed to bring Russia’s financial condition to a stable position despite the unfavorable external environment.
Statistics show that the Russian economy grew by 4.9 percent in the second quarter of this year, which made it possible to close the first half of the year by 1.6 percent. RANEPA estimates indicate that good positive GDP dynamics will continue in July-August 2023.
It is significant that the main drivers of growth are domestic industry and the trade sector. High growth rates are also observed in construction and in the HoReCa sector, that is, the hospitality industry. At the government meeting, it was emphasized that this was largely due to the growth of non-oil and gas revenues. At the end of August, they exceeded 1.82 trillion. rubles This is 56.5 percent more than last year. Also a driver was the manufacturing industry, where growth was more than 6 percent.
It is important that household incomes are growing noticeably, outpacing inflation, and the increased demand for labor leads to a certain shortage of personnel and record low unemployment levels (3 percent as of July 2023). Rising wages allow consumer spending to increase. Thanks to preferential mortgage programs, the population's housing supply is increasing, and the construction sector is demonstrating good growth rates in new apartment buildings. Thus, we can conclude that favorable conditions have been created for the development of domestic demand and supply.
Corporate sector income is also showing good dynamics. Many large corporations report high profits. This largely explains the high investment activity, which was recorded at the end of the first half of the year as plus 7.6 percent compared to the same period last year.
A noticeable increase in investment is demonstrated by manufacturing enterprises, manufacturers of computers, electronic and optical products, electrical equipment, cars and other vehicles, machinery and equipment. Metallurgy, coke and petrochemical production, as well as some light industry sectors are showing good results. In addition, investments in the extractive industries, energy generation, water supply and sanitation sectors are growing. The share of companies' own funds in the structure of investments in fixed capital increased compared to the same period last year, which indicates that the state has created conditions for increasing private investment and increasing demand for government support mechanisms.
The government continues to help resolve complex foreign trade issues. At the end of seven months of the year, the current account surplus (CAS) amounted to $25.2 billion. This value was achieved, including through effective diversification of exports, increasing the volume of supplies of agricultural products, fertilizers, metals and other goods that are in high demand abroad. The increase in non-oil and gas exports was reflected in the state budget revenue statistics for August. That is, the government manages, through measures to support and regulate exports and protect the domestic market, to ensure good margins for the export business for domestic producers.
At a meeting with the prime minister, it was noted that budget expenses, after the advance period at the beginning of the year, returned to traditional indicators and at the end of August amounted to about 2.24 trillion. rubles.
As can be seen from the latest operational statistics of the Ministry of Finance for seven months of this year, the federal budget deficit has dropped significantly below 3 trillion. rubles or 1.5 percent of GDP, which, taking into account the positive dynamics of the economy, allows us to be optimistic about the possibility of maintaining those budget expenditure items that effectively stimulate the national economy in priority sectors. Today, maintaining subsidies and preferential business support programs is as important for public policy as fulfilling social obligations to citizens.
Thanks to timely government measures taken to adapt the economy to serious external challenges, we can count on the continuation of positive trends and in the future. It is now almost obvious that the state budget deficit at the end of 2023 is unlikely to deviate much from the planned 2 percent. And the economic growth we predict in the current and next year will ensure timely filling of the budget and the ability to control its parameters in accordance with the values approved by law. So we can say that the skeptics’ forecasts were not justified and Russia continues to move in the given direction.