Nalik lived, is alive and will live
The Bank of Russia for the first time published material entitled “On cash circulation”. Everything connected with cash seems to be of particular interest to people. For some, this is interesting only in relation to their own wallets, and for others in relation to other people’s wallets too (and this happens!). Well, for those who are trying to understand what is happening with our economy and what its prospects are, information about what is happening with cash across the country is also very interesting.
In this regard, I cannot help but say kind words to the Bank of Russia. Today, when the amount of official statistical information published in the public domain has been greatly reduced, you begin to especially appreciate new additional materials containing high-quality economic statistics.
So, what was so interesting that the Bank of Russia published and what could this data mean? Many believe that cash is becoming less and less popular in transactions. The widespread use of payments by phone number alone is worth it. And bank cards are still popular, payment using QR codes… Non-cash technologies for paying for goods and services are improving and becoming more convenient for consumers. At the cash register in a store, you see less and less people who take bills and coins out of their pockets to pay. The conclusion seems clear: cash is becoming a thing of the past. However, don't rush. Now we have official statistics on this matter. So let's see what it shows.
The amount of cash in circulation in Russia increased in 2023 from 16.4 trillion rubles to 18.4 trillion rubles, that is, by 12.4%. In 2022, the growth rate of cash in circulation was even greater — by 16.3%.
The Bank of Russia has calculated not only how many trillions of rubles we have in cash today, but even how many banknotes and coins we have per capita. So, in terms of banknotes per capita: 51 sheets in 2022 and 56 sheets in 2023. Well, okay with banknotes that are measured in “sheets”. Do you know what coins are measured in? Coins per capita are measured in… «circles». If in 2022 there were 491 circles per capita in Russia, then in 2023 there will be 494 circles.
No matter how you measure the dynamics of cash, be it in trillions of rubles, or in banknotes (sheets), or in coins (circles), the result is the same: there is more cash in circulation.
Why is this happening? Why has there been a significant increase in cash in the last two years? And how long can this continue? Many questions arise. Let's try to answer at least some of them.
To the figures already mentioned above, characterizing the increase in cash in the country, thanks to the Bank of Russia, let us add a few more equally interesting ones. Although cash growth was very large in 2022-23, it was still not a record. Thus, in 2020, cash increased by as much as 2.8 trillion rubles. This already leads to certain thoughts. After all, 2020 was the first year of the COVID-19 pandemic, when the state, fighting its negative economic consequences, devoted huge amounts of money to this matter.
In 2022–2023, the country’s economy again found itself in a difficult situation, but for different reasons: geopolitics and sanctions. And again the state began to spend huge amounts of money. Yes, of course, we are not talking only about cash. The state, strictly speaking, does not spend cash. It’s just that part of government spending later materializes in the same cash. For example, workers receiving salaries under government orders cash out part of the money they earn, which has increased. To service the circulation of money in cash, the government prints more banknotes and stamps more coins. This is how it works.
The reasons why the state began to pour more money into the economy are as follows. The Russian economy, especially during a period of large-scale sanctions against it, can be supported primarily by stimulating demand from the state. More money for consumers — more effective demand for goods and services — more incentives for producers — higher production growth. This is the so-called Keynesian approach to combating the economic crisis (named after the outstanding economist J.M. Keynes, thanks to whose recipes the United States successfully emerged from the Great Depression of the 30s of the last century).
When the Russian economy began to nosedive in the spring of 2022, it was precisely the sharply increased budget expenditures that helped counteract this. Everything here is actually simple: money spent by the state is an almost automatic increase in GDP. You say: what happens, is it possible to achieve a ten- or even twenty-percent increase in GDP in one year? Answer: yes, it is possible, at least theoretically.
There are only two practical objections. First, with a corresponding explosion in spending, money can run out very quickly. Secondly, inflation may accelerate sharply. We all understand perfectly well how unpleasant the consequences of this can be. I will mention a third, not so obvious objection: the money still needs to be able to “digest”, that is, the economy must have certain infrastructure, personnel and other capabilities to absorb the allocated amounts, otherwise “indigestion” can happen.
I would especially like to draw your attention to the fact that the Russian Ministry of Finance calls this sharp increase in spending a “budget impulse.” In my opinion, a very accurate name. Because “impulse” is something temporary, rather short-lived. The impulse cannot be long; it will have a completely different name. The prospects for the fiscal impulse are such that, judging by the federal budget for the current three-year period, it will already fade in 2025. A clear indication of this is that federal budget expenditures in 2025 should decrease by 6% compared to the planned figure for 2024.
There will be no budget impulse — there will be no most important reason why our cash flow is growing rapidly today appeal. It will, of course, continue to grow. But when the momentum ends, the rate of this growth will sharply decrease in the coming years.
In general, there is a lot of cash on hand, but the picture will change somewhat. We shouldn’t be too upset about this, if only because little depends on us, the population.
By the way, there is also interesting news: the number of identified Bank of Russia banknotes that have signs of counterfeiting has decreased from 22,605 units in 2022 to 12,210 units in 2023. And you won’t believe it, but it turns out that Bank of Russia coins are also counterfeited. The number of detected such counterfeits decreased from 269 pieces in 2022 to 215 pieces in 2023.
There is more and more cash, less and less counterfeit money, but this story (I’m not sure about counterfeits!) is unlikely to last long. But it’s definitely too early to bury the cash. Macroeconomic reasons are one thing, but people's attitude towards cash is another. A recent opinion poll showed that today only 13% of Russians are ready to completely switch to non-cash payments, while in 2021 there were 18%. So, no matter how highbrow financiers judge, cash lived, cash lived, and cash will live. Still a long time!