30-31 march 2017
MSU Shuvalov Housing, Moscow. Key theme: “The turn of the world history. Russia’s new strategy”
The economic growth is an illusion, if the population gets poorer.

Published: March 10th, 2017

The economist, independent analyst and expert of the Moscow Economic Forum Vladislav Zhukovsky talks about the economic trends that will determine the degree of prosperity of life in Russia in the coming years.

– Vladislav, a year ago, on the MEF-2016, you said that the Russian economy is shrinking and its potential is very limited. Today, on the eve of the MEF-2017, how would you assess the economic situation in our country?

– All diagnoses that we set a year or two, or three ago, did not go away, these negative processes continue to evolve. The situation in the Russian economy can be described in three words: degradation, initiation and compression. Here is the increasing sterilization of the economy, and exportability, and deindustrialization, and disintegration of economic processes, and bureaucratization, monopolization, authorization, dollarization. In simple terms, the economy continues to fall to the bottom very confidently.

On the other hand, our officials have discovered a new art form – more and more sophisticated forms of statistical additions, manipulations and drawing a beautiful reality with openly or frankly depressed the deteriorating crisis situation in the country. If in 2015 the pace of economic decline even with all the additions were estimated at 3.7%, while according to the latest revised data, the downward movement amounted only 2.8%. In 2016 instead of the fall of the economy by 0.8-1%, they call the figure of 0.2%. And in December of 2016 according to the revaluation of industrial production it turned out that the real economy was actually growing.

It is obvious that instead of solving the real, pressing problems of increasing poverty, deskilling of workers, the elution of the country's intellectual capital export as money, and the best minds abroad, instead of solving the problems of closing small business (for the last three years more than half a million of Open companies and Individual enterprises disappeared) our government is engaged in a different kind of statistical alchemy, and palmistry. Over the last three years as the result of the change in the statistics system, all major macroeconomic indicators were overrated.

Now, in the best light to show the situation in the economy, they deal with the outright manipulation of price indicts and also with the dynamics of air in the total structure of GDP – from this year in gross domestic product air-conditioning and heating facilities are included, as well as so-called bonded Rent – this is money that the property owner allegedly pays himself for that he lives in his own house. And accounting for defense products investment in fixed capital in the final output of goods and services was added, which had never happened before. It is for this reason, that for no reason dramatically the dynamics of investment in fixed capital and the rate of capital accumulation has increased from 19% to 21%. This is a pure result of the growth of the state defense order and inventory of the Russian economy. Even a few percent of the GDP are added by the mythical statistical observations which say that the situation with small and medium business in Russia is good.

With so different kinds of manipulations, last year into the dynamics of GDP of about 2.5-3% were added– we are said that it drops by only 2%, but in reality it fell by about 10-13%, depending on how you estimate the price indicts and changes in the methodology of macroeconomic indicators. Officials admit themselves that they made 1.5 trillion rubles in the statistical discrepancy, i.e. they simply wrote them in the dynamics of GDP.

However, it , as we can see, doesn`t worry people very much and there is a zero reaction from the public. Therefore, if we show that the crisis has not only ended, but in recent years it did not exist, I think no one will be surprised – apparently, the scale of propaganda, brainwashing, public relations are so enormous that the society is ready to accept any information as the truth in the last instance.

– What is your forecast? Can the economic situation change for the better in the near future?

– The degradation and simplification of the economy continues, now they will occur more latent, because 2018 election year is coming. We understand that the President will be chosen as a person with experience of the President, so it is necessary to draw some beautiful picture to have something to demonstrate to the electorate. Thanks to all the additions people will see that the economy will begin to grow. The government will also boast of a strong ruble at an exchange rate of 62 rubles per dollar, cheap oil and the crumbling balance of the budget. The Central Bank will draw the strong ruble due to the compression of consumer spending, in other words, due to the permanent impoverishment of the population in three years, the leaching of the middle class, growing income differentiation, polarization of the society.

In fact, we got 26 months of continuous fall of real income; in total , they fell by about 17.5%. If we consider not the average temperature in the hospital, and to look at the proportion of people whose income is below 35 thousand rubles a month, i.e. below the average in the country, it turns out that the real population incomes fell by about 30-50% over the past three years. Against this background, we see the compression of retail turnover and market services in the tourism market, the compression of different kinds of small businesses, because it` s simply impossible to sell a product to anybody, because the population simply can't afford it.

And we see continued suffocating, frankly blood-sucking, parasitic macroeconomic policies. On the one hand, there is a reduction in public spending, primarily on social spending, for the support of poor, for different kind of target and address investment programs. This is reflected in the frozen state of the parent capital, the freezing of indexation of pensions and allowances, retirement savings, phasing out of subsidies for a number of suburban transportations and management overhaul, a permanent increase of a tariff for housing and communal services, privatisation of health and education. On the other hand, we see constantly rising costs for businesses in the form of prohibitively expensive loans for most forms of business and the huge tariffs of natural monopolies.

Hard macro-financial policy means a further fall into the poverty of the majority of the population. Today, 21% of Russian citizens are officially poor. If you evaluate the cost of living not 10, but 22-23 thousand rubles, it turns out that at least 72-75 million of Russian people live below the poverty line , that is more than half of the population. By the way, only 10% of our citizens have incomes above one thousand Euro, this is the poverty threshold in Europe. So, our place on the world economic map is not the fifth and not the tenth. We are somewhere on par with Turkey on the GDP per capita, purchasing power parity, current exchange rates.

– What topic you would like to speak within the framework of the MEF? What results do you expect from the Forum in March?

– The next MEF is by and large entrepreneurial community voice crying in the desert. It is clear that none of those who determine macroeconomic policy, distributes annually a trillion rubles of public procurement, is not interested in it. Today we see a strange situation that the windfall in oil and gas complex, metallurgy, raw materials, natural monopolies, in the production of various kinds of fertilizers, technical complex, which has grown over the last 2.5 years, more than 55% in ruble terms, all to no positive effect in the economy do not lead. The growth of corporate profits did not affect the growth of investment and wages. Thus by 2016 the total number of entrepreneurs in the country fell by 75 to 80 thousand units. This polarization will continue for a very long time, until the change of social-economic formations. Now there is no general strategy. There is a strategy "Money triumphs over evil", and who is the right party who is close to the center of decision-making, he takes everything away. That's the problems we'll talk about, we'll discuss what to do about the business community.

Source: Press service of the MEF