American financial portal Business Insider presented “shocking facts about the Russian economy.” For example, Americans are surprised by the huge financial reserves of Russia, a sharp increase in wages and a huge number of poor people in our country. Where does such a view of the Russian economy come from and is there anything to be surprised at in this case?
One of the “shocking” facts is called the Russian reserve funds in the amount of 460 billion dollars (despite the fact that the external debt of Russia is 29% of GDP). For Americans, this situation is really unusual.
“The US has a huge external debt and reserve funds are several times smaller than the Russian ones: 126 billion dollars against 460 billion, Therefore, speaking about us economy, they often use the concept of “soap bubble”, – says managing partner of “2K” Tamara Kasyanova.
“When determining the country’s ability to respond to external trade shocks, reserves are compared with imports and the country’s external debt. Ours cover 17 months of imports or the entire foreign debt of the country as a whole. In terms of coverage, we are in the Top 10 economies of the world, and from the largest – in the Top 5”, – says Deputy Director of the group of sovereign ratings and forecasting ACRA Dmitry Kulikov.
However, developed countries do not always need to accumulate large resources. Why save them? For example, to manage your own currency rate. And, of course, exporters of raw materials, such as Russia, Norway or the UAE, accumulate reserves in order to protect their economies from a sharp fall in commodity prices and a sharp outflow of capital.
Low public debt is generally the dream of many developed countries. “The ever-growing national debt is a headache for the United States, they have been trying to contain it for a long time without success,” Kasyanova points out. Japan has a national debt of 300% of GDP, China – 250% of GDP, the US – 100% of GDP and exceeded the astronomical 22 trillion dollars. In fact, over the past 20 years, most developed countries have significantly increased their debts.
Unlike Russia, Americans are used to living on credit, but because of the hegemony of the dollar, they are even with a record public debt is still able to attract huge investments and increase the volume of its economy. Russia will not succeed. Therefore, it needs stability and stability, which Moscow is literally gnawing out. The flip side of the coin is low economic growth. The budget surplus and the absence of large debts are a protection against the possible introduction of new sanctions against Russia, the Finance Minister said. “It is strange to see the surprise from the US about the high level of reserve funds in Russia. The United States is working to destabilize the Russian economy by imposing sanctions. The country, in fact, accumulates forces. In such a situation, we can not afford to live as impressively as the United States”, – surprised Irina Lanis from the company “Finish”.
Surprise Americans presented and the Russian ruble, which lost from 2014 to 2017 half of its value. For Russians, this is hardly a shocking fact. The fall of the ruble following the decline in oil prices is a common phenomenon with which all exporters of natural resources live. However, as soon as the sanctions risks receded, and oil went up the hill, the Russian ruble immediately became the fastest growing currency in the world.
Also, the authors of Business Insider are surprised that over the past three years, the average salary in Russia has increased by half. So, if in 2016 it in terms of currency was 437 dollars, in 2019 it reached the level of 670 dollars. Americans are surprised by the fact that wages can grow so quickly, and even in a country that is under us sanctions and depends on the export of cheaper oil.
“For an external observer, rapid exchange rate fluctuations often distort the picture of what is happening in the country. Hence, for example, statements about the fact that “the Russian economy is torn to shreds”, as the dollar equivalent of GDP fell in 2015 by more than 30%. Although if measured in real terms, it corresponds to a maximum of minus 3%. Surprise concerning the dynamics of wages from the same series,” – said Kulikov.
“In nominal terms, the average wage in Russia has increased by 18% since 2016, and in real terms – by 10% (we are talking only about white wages). However, by the standards of developed countries, it is already fast enough. In the US, for comparison, for the same period – the growth of slightly more than 3%”, – explains the expert ACRA.
Meanwhile, Russians, too, are likely to be surprised by such a high wage growth. Because the growth of their well-being is not affected.
A more realistic picture of the well-being of Russians shows not the growth of wages, which can be provided by the indexation of salaries of civil servants, but real incomes (minus mandatory payments, adjusted for the consumer price index). And here the situation is not so rosy. According to HSE estimates, from 2014 to 2017 real disposable income of the population was in a zone of chronic recession, and in 2018 there was stagnation. 2019 may be the fifth consecutive year of decline in real incomes. In April, real wages, for example, increased by only 1.1% (according to the Ministry of economic development).
Another shocking fact for Americans is that 13% of Russians live below the poverty line. And this at the time, as Moscow heads the world ranking of cities with the largest number of residents-billionaires who earned a fortune in the “dashing 90s”.
Rich people who earned their millions thanks to the chaos of the 90s – this is Russian history. At the same time in Russia began to appear oligarchs who then and blood earned their billions. A new class of entrepreneurs is emerging. And this is Krasnodar “the Magnet” headed by Sergey Galitsky, and little-known until recently, the brothers Igor and Dmitry Bahmanov, who made a fortune of 2.8 billion dollars for the development of computer games. Property inequality and stratification of society is not a unique state of Russia.
“To look at the number of billionaires in Moscow alone makes no sense, it is a state in a state. By the number of billionaires Russia in fifth place, and the first – the United States”, – said Kasyanov. Rich and poor are everywhere. Another thing is that the number of poor in Russia does not suit anyone – neither the poor themselves nor the Russian government, which is looking for new ways to support those in particular need.
“The concept of poverty differs from country to country. And the growing property division is a global trend: the poor are getting poorer, the rich are getting richer. But the Russian poor are poorer than the American ones,” Kasyanova notes. In addition, the US is home to more than twice as many people than in Russia. In Russia, according to Dmitry Medvedev, 19 million poor people. Unofficially, some call the estimate of 35 million poor.
In rich America, the situation is not much better: only according to official UN data, in the US about 40 million people live below the poverty line, of which 18.5 million – in extreme poverty. By UN standards, absolute poverty is a person’s income of two dollars a day or less. This is about 140 rubles a day, or 4200 rubles a month.
“Our teachers and Junior medical staff receive 8,000 rubles a month in the regions, which is very close to the UN threshold. Social inequality in recent years in Russia has really become one of the most acute problems. In addition to traditional corruption and nepotism, the catalyst for this process is a flat scale of income tax, which does not allow the state to effectively redistribute finances in favor of the poor, as is the case in the West,” – said the expert of the “International financial center” Vladimir rozhankovsky.
President Putin set the task to reduce the poverty level in the country twice by 2024, that is, from 13.2% in 2017 to 6.6%. The task is not trivial, given that in the last five years the real incomes of the population are declining. On the other hand, the poverty rate has been reduced to 2.3 times in 18 years. Will it be possible to do it faster?
The Ministry of labour found that the number of poor should be reduced through the indexation of payments, higher insurance pensions above the rate of inflation, raising the minimum wage and signing the social contract with the poor. The latter means that the family receives money (an average of 36.8 thousand rubles) on the condition of employment, retraining or opening their own business. A year after the conclusion of such a contract, 50% of families go out of poverty. And it is expected to sign such social contracts with 6.7 million people out of 19 million poor.
To a large extent, poverty reduction is achieved through economic growth: for this reason, poverty will be reduced to 9.9% by 2024, according to HSE experts. The payment of the first child benefit will reduce the share of the poor by another 0.04 percentage points by 2024, and the provision of benefits for the third and each of the subsequent children will reduce poverty by 0.02 percentage points. the Effect of supporting women’s employment (in the form of opening pre-school groups) will be minimal: only 0.01 percentage points by 2024. This will not be enough to reduce poverty twice. Therefore, additional measures are needed.