A whim for your money. How much will Putin’s election populism cost the Russian economy?

Since 920 billion is approximately one and a half times more than 600 billion, it turns out that these promises are incompatible not only with the old version of the budget rule, but also with its “covid” modification, which the Ministry of Economic Development proposes to extend for another three years. Before Putin’s words about 10 thousand, every pensioner still agreed, but after – no longer. Not up to the rules when the rating of “United Russia” falls!

However, it is possible to make ends meet by using excess budget revenues. Normally, they go to pay off public debt. Now Minister of Economic Development Reshetnikov raised the question about spending them on more popular things.

And the surplus income this year is great. On August 25, the federal budget received already 75% the amount that must be collected for the entire year. The proceeds from the MET on oil are 71% higher than in the same period last year, from VAT – 27% higher, for all income items in aggregate – 33% higher. The reason for the increase in income is trivial – oil prices have risen. At the end of August 2021, it costs $ 70-72 per barrel, a year earlier it was $ 45-46. As a result, GDP growth is not bad either: at the end of July, the IMF announced that in Russia in 2021 it will be 4.4% (three months earlier it was predicted only 3.8%). A remarkable indicator – the last time a four percent growth was observed already in 2012! True, Russia’s lag behind the advanced economies will still only worsen: after all, in the United States, at the same time expected growth of 7%, in the eurozone 4.6%, in the developed countries in general 5.6%, and in the world 6%.

The Ministry of Economic Development, apparently, lobbied for an increase in government spending not so that hundreds of billions were simply distributed to pensioners and the military. Neither the total wealth of the country nor the gross income can grow from redistribution. Until Putin personally intervened with his pre-election needs, most likely, it was assumed that the additional spending would take the form of public investment. This would be both plausible and beneficial for officials distributing capital investments. After all, the ineffectiveness of such spending is almost never punished in the Putin system.

Now, there is probably no money in the budget for additional state investments. But there is also an off-budget National Welfare Fund with assets on 13.7 trillion rubles, of which 8.5 trillion are liquid. In May, the government has already allocated from this source almost 900 billion rubles for 7 infrastructure projects… These are BAM, the railways of the Moscow junction, the Moscow-Kazan and Kazan-Yekaterinburg highways, the renovation of the St. Petersburg metro cars, the modernization of the communal infrastructure in the regions, and the “advanced social and economic development of the Angarsk-Yenisei macroregion”.

Even if the prospects for recoupment of these projects are dubious, it is quite possible that the likelihood of funding for several more such undertakings will now increase. The rhetoric about investing in the future, about state investments as a driving force for the country’s development is popular in government circles almost as in the Brezhnev years. And as then, the country is experiencing a waste of resources and general stagnation.

There are also growing segments of the economy in modern Russia, driven by private investment. Online commerce, information technology, digital entertainment and business education are developing, reflecting global trends that are still widely and successfully adopted by domestic entrepreneurs. The consumer sector in large cities is doing well as people continue to flow to these cities. With good external conditions, from time to time, the export industry is experiencing an upsurge and pulling subcontractors. Some areas of food production are relatively prosperous, but here favorable dynamics are often provided by the artificial removal of foreign suppliers from the market, that is, manufacturers do not thrive for the benefit of consumers. And around these islands of success is a disaster zone from which both people and capital flee.

Under normal conditions, the flow of labor and capital from unprofitable to profitable activities leads to the fact that productivity and incomes generally grow. In Russia, the real income of an average family today is at the same level as 10 years ago.