Damage was removed from the Russian economy

Spring forecasts were built on a wave of stress, amid great economic uncertainty

Spring forecasts were built on a wave of stress, amid great economic uncertainty

A photo: MOSCOW City News Agency

In a black-black room, a black-black analyst wrote a black-black forecast for the Russian economy… Why is everything black? Because it’s dark: they saved light, they were afraid of a terrible, terrible crisis. It was in the spring of 2022, when the future seemed black and black (and this is still an understatement).

We all remember how experts competed last spring to see who could draw the worst scenario for our economy.

It seemed to some, especially abroad (and, most likely, they really wanted) that we would return to the dashing 90s. Or maybe even further into the hopeless past. And now, almost a year has passed, and everything turned out to be … Well, not exactly cloudless, but certainly much more calm than many forecasters saw.

On Friday the 13th, we decided to take a look at the darkest omens and compare them to what happened in reality.

Prediction #1

“The Russian economy will shrink by 11.2%”

Reality: GDP fell by 2.7%.

Last April, the World Bank said the Russian economy would contract by a whopping 11.2%. This is an unprecedented decline. This was not the case even in 1998. This should have been influenced by the “hellish” sanctions announced by the West. But it didn’t happen. According to the latest data from the Ministry of Finance, the economy will contract, but not so much – by only 2.7%. Unpleasant, of course, but tolerable.

Prediction #2

“A dollar will cost 200 rubles”

Bucks hover around 70 rubles.

Bucks hover around 70 rubles.

A photo: Ekaterina MARTINOVICH

Reality: the dollar fluctuates around 70 rubles.

This is not even a forecast, but a “confirmed diagnosis” from US President Joe Biden. One of the advisers reported to him that the dollar in Russia is already worth 200 rubles. And he take it and blurt it out officially at the end of March. Moreover, he added that “the Russian economy is torn to shreds.” Barack Obama said the same thing in 2015.

And both were wrong. The dollar exchange rate, after a sharp rise to 120 rubles in early March, on the contrary, began to decline sharply and fluctuated in the range from 60 to 70 rubles for almost the entire year. In an attempt to raise the ruble exchange rate, at the end of last winter, the Central Bank sharply raised the key rate and imposed foreign exchange sanctions against its own citizens: for example, Russians were forbidden to withdraw more than $10,000 from their foreign currency accounts, in fact, forbidding them to manage their own money. And the sanctions have inadvertently strengthened the ruble: the flow of imports to Russia has fallen, the demand for dollars and euros has decreased, and in such conditions the national currency is growing.

It is sad that the horror story about 200 and even 250 rubles was picked up by some experts and bloggers. As a result, some Russians believed them and for some reason bought dollars at the most unfavorable rate.

Prediction #3

“The number of unemployed will double”

Reality: Russia has record low unemployment.

In April, the US agency Bloomberg polled unnamed analysts, who predicted that Russia would face terrible unemployment. Like, it will double – up to 9%, which is a record almost since the default.

“This is reminiscent of the beginning of the 90s, when reforms began in Russia and factories were closed,” Evgeny Gontmakher, doctor of economic sciences, had a nightmare at the time.

Foreign analysts and the Russian expert were wrong. Mass unemployment in the country did not happen. Although many Western companies left Russia, the enterprises themselves remained. In most cases, they had domestic owners who retained all the staff. On the contrary, due to the departure of hundreds of thousands of Russians abroad, some jobs have even been vacated. In some industries, the problem arose not of unemployment, but, on the contrary, of a shortage of personnel. At the end of the year, Rosstat reported a record low unemployment in the country – only 3.7%.

Prediction #4

“Inflation will exceed 30% per annum”

Reality: Prices rose 11.9%.

At the end of February 2022, Alexander Lyakin, Doctor of Economics, predicted that prices in the country would rise by 30% due to the devaluation of the ruble. True, he made a remark – this will happen if the Russian currency is not returned to the previous rate, but left at a higher level.

100 rubles per dollar. In April, the same World Bank predicted that inflation in Russia would reach 22.5% by the end of the year.

In reality, after a sharp rise in March and April, prices even began to fall from mid-summer – largely due to the strong ruble, as well as an excellent harvest. At the end of the year, 11.9% came out.


Miracles of adaptation

George Ostapkovich.

George Ostapkovich.

Georgy Ostapkovich, Director of the Center for Market Research at the Higher School of Economics:

– Spring forecasts were based on a wave of stress, against the backdrop of great economic uncertainty. Everyone understood that there would be a terrible sanctions burden. And Russia can not cope with it. But, surprisingly, our economy turned out to be very adaptive. No one expected that our businessmen would adapt to the current realities so quickly and be so enterprising. Apparently, they are used to living under a tough regulatory burden (eternal checks and other pressure from the state. – Ed.). Therefore, they are used to always finding managerial solutions, no matter what problems fall on them.

The economy began to rebuild, they began to look for new ways to deliver foreign goods, they began to replace imports with domestic products. The government and the Central Bank played a huge role. They brought down the first wave of panic. The same Central Bank made every effort and took many effective steps to stop the rise in prices and keep the ruble exchange rate. The government began to actively help entrepreneurs and the population. As a result, it was possible to reduce the drop in income. And export earnings were high. This helped too.

In the bottom line, the economy worked well thanks to the adaptability of business and the emergency measures of the government and the Central Bank. But at the end of the year, the economy fell by almost 3%. And could grow by 4%. That is, the real drop was about 7%. And this, by the way, is about 10 trillion rubles. I also note that dry figures do not say anything about the quality of life, which, of course, has fallen more.


Folk horror stories

There were also rumors that spread even faster. The infernal fears of the Russians were reinforced by the effect of a “broken phone”, conjectures were overgrown with logical explanations and realistic details … Most of them also did not come true. Here are some of the scariest ones.

“Medicines, appliances and cat food will soon disappear”

This fear was even partially realized (although not for long). For example, rare medicines really ran out at some point in some pharmacies. Because before that, pharmacy chains bought them in units and were not ready for the influx of customers buying them in bulk. The same thing happened with household appliances. For example, Apple products were swept off the shelves very quickly. Some pet foods doubled or tripled in price in the spring.

But… the assortment of all goods was restored within a month. No one was going to block the flow of pills into the country. The foreign pharmaceutical business, unlike some other areas, takes good care of both its customers and its profits. iPhones are supplied by parallel imports (that is, without the permission of the manufacturer) from Kazakhstan and other neighboring countries. With food for dogs and cats, too, no problem. Suppliers quickly adjusted supplies and learned how to circumvent sanctions. In addition, Russian manufacturers also increased output.

“Banks will fail, all money will be lost”

This is a standard horror story for all Russians. We are all afraid of a repeat of past crises, when the financial sector went bankrupt first. Both people and companies were losing money. But the authorities have learned from the mistakes of the past. Now, when it smells of fried, the banks are first of all helped. Because otherwise the domino effect will start and the whole economy will crumble. For the proof of this thesis, by the way, this year they gave the Nobel Prize.

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