Igor Nikolaev: In the fall, the Russian economy should not wait for shocks

For Russia August is almost always connected with a series of political or economic cataclysms. However, in 2022, the month passed quite calmly, if you can say so. Invest-Foresight discussed with Doctor of Economic Sciences, Chief Researcher of the Institute of Economics of the Russian Academy of Sciences Igor Nikolaev, what seedlings can be expected on the economic field of our country in the remaining months before the New Year.

Igor Nikolaev, Chief Researcher of the Institute of Economics of the Russian Academy of Sciences. Grigory Sysoev / RIA Novosti

– So, August 2022, one might say, did not distinguish himself this time by any serious cataclysms on the economic field. Is it so?

– We have something to compare with. Introducing August, we remember first of all default of August 1998. Compared to those events, today’s August from the point of view of the economic upheaval, it is “thy face and God’s grace.”

There were no cataclysms, the rate remained stable, prices even showed some microscopic deflation. And it is by this indicator that the economy is judged by people above all. Accordingly, macro indicators were also expected – those that Rosstat gives us. There is a crisis, of course, and every month the rate of decline increases (it’s about monthly estimates of GDP dynamics from the Ministry of Economic Development). And this is not a surprise, but, given everything that is happening, this is also not a cataclysm.

Therefore, everything is relatively calm.

– This is a positive sign for the Russian economy – that since the beginning of 2022 nothing serious or catastrophic has happened?

– Everything is relative, I repeat, and this is good at the moment. Although, you know, if you change one joke, then you can tell it like this: when a person fell out from the 50th floor of the skyscraper and is still flying – he has not yet fallen. Therefore, in general, everything is fine for him.

The rate of decline, I repeat, is increasing. At the same time, relative stabilization and adaptation to the shock of the first weeks occurred. Of course, it’s good that there was no shock, but it’s bad that the negative process goes and deepens.

– How do you see the period from September to December for the Russian economy? What should we expect?

– There will be the same process of deepening and worsening the situation, but nothing catastrophic will happen. And it’s not because really all we have is well. If analyzed from a basic point of view of factors affecting the economy, extensions play main role.

Almost the most severe consequences from sanctions that can be expected is the impact of the rejection of Russian energy imports. This threat is gradually being implemented – since August 10, the UK and EU countries have stopped coal imports, oil restrictions have already been adopted, gas is also not on the sidelines. And in the fall, these processes will not end.

Naturally, Russia will change export flows, reorienting them to Asian markets, but we understand that it is impossible to refocus absolutely. Yes, it’s good that this negative process is not going sharply, it will happen slowly, for years, but it still doesn’t stop.

– What are the most pressing tasks today in connection with this need to be solved by the economic bloc of government?

– Russia’s economy is based on raw materials. We are talking over decades about what is needed to get off the oil needle, but didn’t manage to get off it. Refusal to import Russian energy carriers will be painful and we need to answer the question again: what will we sell instead of oil? Instead of gas?

There are such goods that may become “new oil” and will not fall under sanctions under no conditions.

– What kind of goods are they?

– The European Union specifically stipulated that food, agricultural products, mineral fertilizers will be out of sanctions.

– But these are goods with fairly low added value. And are there those that have higher added value and may also not fall under sanctions?

– There’s no time for choice. Low or high cost – miracles don’t happen like this, so that Russia could quickly produce for export some high-tech product. Recently we launched again the production of LADA Granta with airbags – can this be called high technology?

If grain is a very popular product and we export it for billions dollars per year, that means you need to focus on this product. The same with fertilizers. Facing food problems, the world needs our fertilizers, and it can’t survive without them.

Pharmaceuticals and the production of medical equipment are being pulled up. It is necessary to solve

the task of preserving foreign markets, finding those niches where without Russian products the world will not be able to survive, and developing them.

– Many experts say today that the crisis in Russia is serious and for a long time? Do you agree with this opinion? How “serious”, in your estimation, is it, and for how “long”?

– Yes, the crisis in Russia is serious and for a long time. More precisely, I will not guess, since economic uncertainty is very high today.

I would now limit the planning horizon to a period of one and a half or two years. Everything else is divination. Political and geopolitical factor are too important for our ability to predict with enough degree of reliability for a longer period.

The current year, next year – the crisis will remain, and then we will see. But this 1.5 year is no longer a short-term period, but a medium-term one. And that it will be a last stop, it is hard to believe.

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