Gazeta Polska (Poland): the Russian economy is tanking. The slow death of the corrupt system

In a different situation probably would be possible to take some measures, but the problem is that, on the one hand, the government does not, and on the other they will not bring any results, because the Russian economy is distinguished by a retardation, and Vladimir Putin for many years did nothing for its modernization.

The former Minister of Finance of the Russian Federation considers that the Russian economy has fallen into stagnation, and the government to stimulate growth, should increase investment in education and health. We are talking about 1% of GDP, nearly 20 billion dollars.

Alexei Kudrin, who now holds the post of head of the audit chamber, said that if the GDP will shrink this year, as expected, to 5%, then the rate of growth of the Russian economy in ten years will amount to only 1%. Speaking on 11 July in Moscow, Kudrin stressed that it is very small. In his opinion, Russia has the potential to achieve a growth rate of 3-5%, but the government has not taken the necessary steps. Expect it to turn to it, is not necessary, because the priority is funding for security forces and Kremlin oligarchs, not the situation of ordinary Russians and macroeconomic indicators. The main problem is that the crisis is not only a pandemic coronavirus. It has a structural nature: the Russian economy, which in the years of oil prosperity and not reformed Putin, continues to depend on hydrocarbons.

For the leaders fell on hard times

Of course, most of all the Kremlin has to worry the financial position of the companies acting as pillars of the energy sector, and, consequently, of the entire economy. In the first quarter of this year net loss of Gazprom totaled 116,249 billion (1.62 billion dollars). How serious was such a blow for the company, shows the comparison with the indicators of the same period (heating season!) in the past years. For example, in 2019 in January-March the group received a profit of 7.48 billion dollars. Now the size of the debt Gazprom is 520 billion dollars. Moreover, it is clear that the results of the second quarter will be even worse.

The income of Gazprom from gas exports in the first five months of 2020 has decreased compared to the same period of 2019 by 53%. In January-may, he earned about 9.7 billion dollars. Gas exports decreased by 23% and amounted to 73 billion cubic meters. In may this year, the group sold abroad to 11.9 billion cubic meters of gas of 1.12 billion dollars, that is 15% less than in April.

Everything indicates that the year 2020 will be for Gazprom worse than the previous. In 2019, the company delivered to the markets of foreign countries, including China, 199,2 billion cubic meters of natural gas, 1.3% less than in the record year 2018. At the same time, the volume of exports in the “near abroad” grew up in 2019 2.2% 37.7 billion cubic meters.

The crisis was a blow also to the segment of liquefied natural gas. The revenues of the companies “Sakhalin Enerdzhi” and “Yamal LNG” from its sales in the first five months of 2020 has decreased overall compared to the same period last year by 16%. As for hydrocarbons, the poor look all the export figures. The volume of Russian oil exports in January-may 2020 fell compared to the previous year by 33% and amounted to 33.7 billion dollars. In physical terms, exports fell 3% to 104,4 million tons. The sharp decline in revenues due to the fall in world oil prices.

The volume of export of oil products in January-may 2020 declined by 1% and made of 60.14 million tonnes, and the income from it, compared to the same period of 2019 — 23% (they amounted to 22.2 billion dollars).

In addition, Russia is facing the loss of their former positions on the world oil market, because its deposits have remained mainly this oil, which is difficult to obtain. We can talk about almost 70% of the reserves. Even the Minister of energy Alexander Novak at the session of the government in 2019, it is predicted that by 2035, Russia will likely be forced to cut oil production by 40%.

As for gas, in this area the situation for the budget also does not look rosy. Opportunities for substantial increases in supply through pipelines is no more, in addition, the government has to subsidize projects to export LNG. In fact, the income they bring, and Russia has no chances of becoming a leading player in this market. Prospects look bad. Quite realistic is this scenario in which by 2035, Russia will become a country that produces hydrocarbons only for their own consumption and not for export.

Projects will have to shelve

Russia’s Central Bank predicts that GDP in the second quarter will be reduced by 9.5-10%. Many sectors of the economy showed the lowest in April and may began to recover gradually. The international monetary Fund predicts that the decline of the Russian economy in 2020 however, will be 6.6%. According to analysts of the “Economist intelligence unit” (EIU), it will return to pre-crisis level not earlier than the end of 2024 and will be one of the most slowly recovering economies in the world. Experts also believe that the rate of decline in the second quarter of the current year will not be the same as suggested by the Russian Central Bank, and will exceed 15%.

In the second quarter of 2020 in Russia again (third consecutive quarter) cited the decline in industrial production. In June, it amounted to 9.4% in may and 9.6%. Primarily this is due to the oil crisis and falling demand for coal and gas. Mining and quarrying decreased by 14.2%.

The unemployment rate reached the highest indicator for the last ten years. The demand for labour fell by 20%. Food consumption was reduced by one fifth and that of services by 40%. Passenger traffic has practically stopped oil and gas companies recorded an unprecedented low level of income. However, if a large state companies can in such a situation to count on help from the budget, the SMEs remain only dream about it. Even fewer rely on the state can ordinary citizens.

In the first half of 2020, the number of bankruptcies of natural persons increased by 47%, the courts have recognised the insolvent 42 700 people. Last year in the same period, such cases were only 29 thousand. The turnover of the retail chain in April decreased by 23% and in may by 20%. In June, retail trade turnover decreased by 7.7% (in may by 19%). In addition, in the second quarter of this year, the Russians earned a record low. Seen the sharpest decline in wages since the economic disaster of 1998. In April-June, real income in comparison with last year has decreased on 8%.

In economic terms, Russia — a colossus with feet of clay. Pandemic coronavirus and the collapse in the oil market is clearly demonstrated. In 2019, the Russian budget was in surplus, but this is probably already expected to be a serious shortage. The government is going to send to the economic recovery in the next two years 123 billion dollars. The Kremlin, however, plans to reduce total expenditure from 322 billion to $ 280 billion in 2021. Putin also stated the need to “revise” on the background of the pandemic on the economic problems of ambitious plans in the field of investment and development, which was planned to allocate $ 400 billion. It was assumed that these for the most part, social programs will be implemented until the end of 2024, but Prime Minister Mikhail Mishustin has already proposed the President to shed up to 2030. It should be recalled that the so-called national projects was one of the key themes of the campaign before Putin’s election in 2018.