Recovery phase: what happened to the Russian economy in 2021

In the past year, Russia, like most countries in the world, began to recover from the economic crisis caused by the pandemic.

If at the end of 2020 the country's gross domestic product decreased by 3%, then in 2021, according to the forecast of the Central Bank, GDP will increase by 4.5%.

At the same time, experts from the International Monetary Fund (IMF) do not exclude that the Russian economy this year will reach a growth rate of about 4.7%.

The value will be the highest in the last ten years.

“The country's economy has not only recovered after last year's recession, but has already surpassed the pre-crisis level and returned to the growth trajectory.

The situation on the labor market has noticeably improved, it is even better than before the crisis.

Unemployment is decreasing, "Russian President Vladimir Putin said at a New Year's Eve meeting with the government.

As follows from the materials of Rosstat, even before the start of the coronavirus pandemic, the unemployment rate in Russia was close to 4.6-4.7%.

In mid-2020, the value renewed its eight-year high and briefly climbed to 6.4%.

However, as Vladimir Putin said at a big press conference, by the end of 2021, unemployment in the country should be 4.4%.

According to the head of state, this year industrial production will increase by 5%, and investments in fixed assets will grow by 6%.

In turn, the construction industry has set a record - the volume of housing commissioned for the first time in the country's recent history should be 90 million square meters.

The country's trade surplus also almost doubled.

According to the Russian leader, in 2020 the volume of Russian exports exceeded the amount of imports by $ 94 billion, and in 2021 the difference will already be $ 184 billion.

In addition, against the background of a general economic recovery, a recovery in trade volumes and an increase in prices for energy raw materials, the country's budget returned to a surplus.

According to the Ministry of Finance, in 2020 the expenditures of the state treasury exceeded the amount of revenues by more than 4 trillion rubles.

At the same time, according to the latest estimates of the department, from January to November 2021, budget spending turned out to be less than revenues by about 2.3 trillion rubles.

Also, Russia managed to reduce the volume of public external debt to 4% of GDP.

As Vladimir Putin emphasized, these are the minimum values ​​in the world.

At the same time, the country's international reserves rose to $ 625.5 billion, and the National Welfare Fund - to $ 185.2.

According to the head of state, this state of affairs testifies to "stability and good macroeconomics."

“It will not be difficult to say that our economy, faced with the challenges of coronavirus infection and the necessary forced restrictions in this regard in the economy and in the social sphere, nevertheless turned out to be more mobilized and ready for such shocks than many other developed economies in the world,” Putin said.

The road to recovery

The accelerated recovery in key indicators is partly due to the structural features of the Russian economy.

This point of view in an interview with RT was expressed by Georgy Ostapkovich, director of the Center for Market Research at the Institute for Statistical Studies and Economics of Knowledge, NRU HSE.

“The pandemic and quarantine restrictions around the world hit the service sector the hardest.

Meanwhile, in Russia, this sector does not occupy such a significant share as in large developed economies, so the coronavirus strike on us turned out to be not so significant, ”Ostapkovich explained.

In addition, according to the expert, restrictive measures for the real sector of the economy in Russia turned out to be less stringent than in most countries.

As a result, such important sectors for GDP as industry, construction and agriculture continued to work practically without stopping, the specialist emphasized.

“In other countries, enterprises were simply closed and stopped.

The problem of stopping the backbone business a little bypassed us.

Against this background, we see more confident compensatory recovery growth, which allows us to beat off losses in 2020, ”added Ostapkovich.

In his opinion, new measures by the authorities to support the population and business also played an important role for the economy.

We are talking, for example, about the introduction of benefits for pregnant women and single parents, material assistance to families with children, as well as one-time payments to various categories of citizens.

In addition, the government expanded the terms of preferential family mortgages, continued to provide subsidized loans to businesses, and extended the tourist cashback program.

As Vladimir Putin stated, in 2021 the volume of financial support measures for the economy amounted to about 1% of GDP.

In total, since the beginning of the pandemic, the authorities have allocated funds for these purposes in the amount of about 5.5% of GDP.

“After all, we didn’t just give out money to anyone.

With the support of the affected sectors of the economy, we aimed everything at preserving jobs, at supporting people with low incomes, who are especially vulnerable in this situation, "Putin emphasized.

Price acceleration

One of the main challenges for the Russian economy in the outgoing year was a noticeable rise in prices for goods and services.

According to Rosstat, in November, annual inflation in the country accelerated to 8.4%.

The indicator more than doubled the target level of the Bank of Russia (4%) and turned out to be the maximum over the past six years.

Note that the frenzied price increase in 2021 was of a worldwide nature.

This state of affairs is largely due to the sharply increased consumer demand after the quarantine restrictions.

Andrey Zubarev, a senior researcher at the Laboratory of Mathematical Modeling of Economic Processes at the Institute of Applied Economic Research (IPEI), RANEPA, told RT in an interview about this.

“Gradually, after the crisis caused by the pandemic, production and supply chains are recovering - although not in all sectors.

Previously stopped machines are started up and after the forced downtime service enterprises are opened.

Hence, there is an increased demand for transport, labor and other production factors.

And following the growth in demand, inflation also grows, ”Zubarev explained.

According to Georgy Ostapkovich, the price of goods in Russia was also influenced by the overpricing of large retail chains.

In addition, the weak indicators of the harvest of fruits and vegetables and the rise in the cost of labor in a number of industries affected the background of the outflow of labor migrants.

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As part of the fight against inflation, the Bank of Russia began to tighten its monetary policy.

So, in 2021, the regulator raised the key rate seven times and raised it from 4.25 to 8.5% per annum.

It is assumed that such actions by the Central Bank will allow to cool consumer demand due to the growth of interest on loans and deposits.

The government, in turn, temporarily freezes prices for some categories of goods, and also approved a number of measures to support domestic supply.

In particular, we are talking about a ban on the export of certain products and subsidies to manufacturers.

According to the Central Bank's forecast, inflation may drop to 4-4.5% per annum in 2022. 

“In the absence of external shocks, such as a sharp drop in prices for hydrocarbons or a radical tightening of economic sanctions, an increase in the key rate in Russia can really reduce inflation and bring it closer to the target,” says Andrei Zubarev.

Plans for the future

It is noteworthy that against the background of a record rise in prices, the incomes of Russians in real terms (adjusted for inflation) returned to growth.

According to Vladimir Putin, in 2020 the corresponding figure decreased by 2%, but by the end of 2021 it should grow by 3.5%.

“The issue of increasing the real incomes of citizens is the key one.

Here we must use all measures of economic policy, including continuing the course of suppressing inflation, ”the president noted at a meeting with the government.

At the same time, the Russian leader called for a transition from emergency anti-crisis measures to systemic solutions to achieve high-quality and long-term economic growth.

According to him, it is necessary to stimulate employment and business activity, as well as attract investments and technologies in promising projects. 

According to the forecast of the Central Bank, in 2022 the volume of Russia's GDP will increase by 2-3%.

The IMF specialists adhere to a similar assessment - the organization expects the indicator to grow by 2.9%.

As Vladimir Putin noted, the main drivers of the growth of the Russian economy should be the improvement of the demographic situation, the development of infrastructure, as well as an increase in labor productivity.

According to Georgy Ostapkovich, the priorities outlined by the president are the key to sustainable development of the country.

“Nobody needs growth for the sake of growth.

The main thing is to increase incomes, decrease mortality, and increase the birth rate.

Improving infrastructure will speed up the supply, delivery and sale of products, as well as improve the mobility of people.

At the same time, it is possible to achieve an increase in labor productivity due to the modernization of production facilities, ”concluded Ostapkovich.