However, Prime Minister Mishustin, in a late-night meeting with Putin, reported that the Russian economy is expected to grow more than 2% in 2023. How realistic is this forecast given the budget deficit and the Ministry of Finance's efforts to cut spending?
Let's get things straight: the country's budget and GDP are two different things. The budget can have a deficit, a surplus, whatever, but GDP – the volume of output of final products, including the private sector – is a little different. Our budget now, if I am not mistaken, is about 30% of GDP. So, GDP is triple the size of the budget. Now, with regard to GDP growth.
The game could be very simple. Let’s say our GDP grows by 12% in nominal terms. We report that we have inflation of 10% in the country. So we have 2% growth. But if we say that we have inflation of 14%, we will have a fall in GDP of 2%. So, playing with these figures – nominal GDP and inflation – you can make the situation a little better looking by reporting lower inflation. I am not saying that the government plays these games, I just want to point out that it is easy to play them. Unfortunately, it is very hard to trust Rosstat figures on GDP, and it is almost impossible to verify them – no one has the volume of data that Rosstat does.Then my next question is about discrepancies in the data. For example, the Telegram channel MMI (one of its creators is Kirill Tremasov, the current director of the Central Bank’s Monetary Policy Department) calls attention to one: in May, according to Rosstat, there was a sharp jump in wholesale sales, which added 0.5 pp to year-on-year GDP growth. Meanwhile, the largest component in wholesale trade is gas sales. And gas is doing bad – the decline in production, which is directly correlated with wholesale sales, actually intensified in May (down 15.4% in May versus down 13.0% over the previous five months). However, Rosstat does not provide the dynamics of individual components of wholesale trade. Previously, they had also pointed out the discrepancy between the rapid growth of manufacturing industries and construction and the weak performance of the transport sector, which are also correlated. The same discrepancy in the data can be found for the consumer segment with Rosstat and Sberindex. Is the opaqueness of some statistics and the distortion of others hurting the private and public sectors? After all, they are having to make decisions based on inaccurate data.
Here it makes sense to look at the experience of the USSR. We can now see in which periods the publication of statistics was curtailed the most. It is the second half of the 1930s, the end of the 60s, and the 70s and 80s. Meaning that statistics practically ceased to be published during periods when the economy grew weakly, which was supposed to be concealed. Therefore, we can assume that since there are less statistics, it means that they are not very good.
The second point is the inconsistencies you noted that we see in related industries. For example, transport is indeed a very good indicator – it always correlates very closely with the economy. And there is a real decline. I literally just looked at the data on rail transportation, and there is a drop compared to previous years. So, I would not say that there is some sort of rapid growth. And what Mishustin says is a question of what is being compared and what euphemisms are being used. You can always play with words without saying anything directly and explicitly.