Invest Foresight interviewed Agvan Mikaelyan, a board member of the Finexpertiza audit and consulting group, about how 2024 will be remembered from an economic standpoint and what prospects await Russia in 2025.

– Perhaps the most important issue of 2024 was adapting our financial system to new realities. I think we haven’t fully resolved this issue yet. The fact is that there was a serious change in wages and a serious inflation surge associated with it. Additionally, this is related to the observed overheating of the economy.
In my opinion, it was a rather serious mistake to allow banks to make money on the exchange rate fluctuation, which they did very successfully judging by the data of the last business week of 2024; as we all saw, their incomes grew.
There are situations when this needs to be done. I personally am not sure whether banks should have been given the opportunity to make use of this situation right now. In 2025, we will see where the ship of financial management will take us; we will have a better idea of the pros and cons of such a decision.
I should note that last year we observed a budget surplus, which comes as a slight surprise considering whether it is reasonable to hold onto these funds. Given the current political and economic realities, these developments are somewhat atypical for Russia. Yet, on the other hand, I do see the rationale behind this approach. Injecting this money into the economy would only have further fueled the inflation. Therefore, I cannot flatly criticize the existence of this budget surplus, with too many uncertainties involved. And the task that the financial authorities are facing is not entirely trivial and requires an objective perspective.
As regards the inflation being the outcome of 2024, it appears that the goal was rather to prevent it from escalating even further, since curbing the inflation under our current circumstances seems totally impossible. Indeed, we have been unable to boost the production of consumer goods. Efforts to slow down inflation require enhancing supply, which is linked to demand. However, it turned out that the latter cannot be curbed in any way, with an overwhelming influx of money reaching civilians and military personnel, as well as the industry. These funds are meant to stimulate market activity, but there are simply not enough necessary commodities available for purchase. Obviously, supply is lagging behind demand. To bridge this gap, investing in supply is essential – but nobody is doing so as credit financing has become super-expensive, while government priorities currently lie elsewhere.
Looking ahead to 2025, everything will depend on the outcome of the conflict between Russia and the global West. I am talking about the current military phase, which should not be conflated with the situation in Ukraine; I have to specifically highlight this as we are now confronting developed nations that collectively account for 50% of the global economy in nominal terms. This presents an incredibly challenging task.
If this confrontation comes to an end, we must be aware that we will still have to produce military goods for a certain period, as we cannot afford to leave our warehouses unstocked. This process will take a while and drive inflation, which is expected to remain elevated.
On the other hand, the special military operation is highly likely to conclude with significant advantages for Russia, serving as a substantial boost for its economy. Typically, post-war recovery acts as a major catalyst for economic growth. At least a portion of these funds, possibly about 3% of the GDP, will flow into the economy, industry, construction, production of goods, and so on, marking a massive advancement. Ultimately, it would mean the supply and economic growth that we all expect and anticipate.
Therefore, the quicker the resolution occurs, the sooner we can address the inflationary pressures, leading to an earlier transition to a period of peaceful development. To remind, both Europe and the Soviet Union saw double-digit economic growth rates following the Great Patriotic War, with each competing strongly in this regard.