Economists : The rapidly rising prices for oil and gas did not bring much happiness to ordinary Russians – at the same time, prices for food and everyday goods are growing wildly. But the world economy seems to be getting out of the crisis. It seems to be – because in fact, no one knows what stage the coronavirus pandemic will take next. Well-known economists, doctors of science summed up the results of the past year and gave their forecast for the year 2022.
Our interlocutors are Vladislav Inozemtsev, Director of the Post-Industrial Society Research Center, Oleg Shibanov, Director of the Skolkovo-NES Financial Center, and Yakov Mirkin, Head of the International Capital Markets Department at IMEMO RAS.
– What was the year 2021 for the world economy, what are the main trends with a plus or minus sign did it indicate?
Inozemtsev: I believe that the outgoing year was generally quite positive: the economies of most countries were confidently recovering from the pandemic shock of 2020, stock markets were growing, and people’s well-being increased.
As for the problems, one of the most important today is the accelerating inflation caused by the significant money supply and the rise in commodity prices. But I think it is a short-lived phenomenon that will cease to be in the spotlight next year.
The problems today are rather concentrated in individual countries: we see the example of Turkey with a depreciating currency; China, with its desire to maintain the previous growth rates, focusing on domestic demand; countries in North Africa and the Middle East suffering from high food prices.
I don’t see any systemic problems in the global economy, and I think that we are entering the same Roaring 20s (“roaring twenties”) as we did a hundred years ago. It is too early to say whether they will end in the same crisis as the Great Depression in the 20th century.
Shibanov: Everyone thought that 2021 would be the year of recovery from last year’s coronavirus crisis, but few expected it to happen so quickly. We can confidently say that the world has returned to the level of the end of 2019, and in some countries has surpassed it from an economic point of view. That is why we saw such a serious inflation, rising prices for raw materials and transportation – these risks appeared due to the rapid recovery of demand, which the supply did not keep up with.
Mirkin : The year, with its rapid recovery growth, ended in positive territory. However, this was accompanied by a pandemic, huge human losses, primarily in Europe and the United States. Among the problems, I would classify a powerful outbreak of inflation, rising prices for fossil raw materials, the “endless” nature of the pandemic. The risks of overheated financial markets persisted (stocks in the US, government debt in several dozen countries, the threat of a debt crisis in China). Plus, there are growing geopolitical risks in the east of Europe.
– With what results does the Russian economy end 2021, how difficult it was for it, is it really, as the government claims, has it already recovered to the pre-crisis level?
Inozemtsev: The outgoing year was difficult for Russia, more likely politically than economically. The economy has indeed recovered to a pre-dock level – the price of this was high inflation and the lack of large-scale assistance to citizens and businesses from the state.
The main risks for the near future, I see losses and debts accumulated in business sectors, which will have to be closed somehow in 2022-2023, and the anemicity of effective demand. Of course, the number of the poor can be statistically adjusted, but this will not add money to the economy.
Shibanov: Yes, the economy has recovered to a level above the end of 2019. But at the same time, we have lagged behind potential trends in 2020-2021, so we will grow a little more confidently for another two years. By itself, 2021 was difficult, rather due to the pandemic reality, but economically it gradually brought about a new equilibrium. The labor market is quite stable, unemployment has returned to low levels at the end of 2019, so I think that in general, our economy is doing quite well so far.
Mirkin: The Russian economy is “involved” in the global growth, it was greatly helped by high prices for raw materials. Formally, in terms of volumes, it recovered to the indicators of 2019 (at least by the end of the 3rd quarter). Although the final growth rates are likely to be lower than the average for the world and for countries belonging to the circle of key economic players.
– What do you consider the most noticeable achievement of the Russian economy and its most serious failure in the outgoing year?
Inozemtsev: I would call the main achievement a sharp increase in budget revenues – by almost 34% compared to 2020 and by more than 10% compared to 2019. This means that the state in the coming years will maintain its course on “handouts” to citizens, adjusting the stagnating real incomes of the population with the help of this instrument. Also important achievements, I would consider the record financial results of the banking sector and the steady growth of construction against the backdrop of a boom in mortgage lending.
The most serious failure is the apparent inability of the government to curb the rise in prices by subsidizing farmers and processors, and curbing the tariffs of natural monopolies. Raising the interest rate amid stagnation also looks far from the best decision, the negative consequences of which will appear in the near future.
Shibanov: Probably the most important achievement is the reduction in unemployment. The labor market is doing well enough, wages in 2021 rose above inflation. And the biggest problem is precisely inflation, its further dynamics and a significant excess of the target (target) of the Central Bank. The situation with food inflation, which exceeded 10% in annual terms, looks especially alarming.
Mirkin: The most notable achievements are that we stayed afloat, the economy started to grow, and the value of exports recovered. And the most serious failure is a huge “natural decline” of the population, at least 1 million people per year. There is nothing worse than lost lives.
What other problems? An outbreak of inflation, an increase in the Central Bank rate to 8.5% (it is difficult for the economy to grow at such “heights”), a large export of capital, an increase in geopolitical risks along with new sanctions. Among the systemic obstacles, I would also refer to restrictions on access to foreign technologies and finance, a high degree of nationalization of our economy – in this sense, we have a kind of “Sinification”.
– What awaits the global economy in 2022: main trends, breakthroughs, risks?
Inozemtsev: I would bet on a scenario of steady growth – 4-4.5% in general, with similar indicators in the US and slightly lower in Europe. Inflation will decline due to the achievement of a temporary ceiling by commodity prices and due to the fact that prices in 2021 have increased quite significantly (base effect). Stock markets in developed countries will set new historical records.
As for the threats, I would look closely at China, where there is a giant credit bubble – but it will most likely not burst in the coming years. All in all, the near future seems to be pretty smooth from an economic point of view.
Shibanov: The recovery is likely to continue – many countries have further growth potential. Therefore, commodity markets will remain resilient, and global GDP will grow stronger than the average expected from developed countries. The main threat is the continuation of the pandemic and the difficulty of dealing with new strains of coronavirus.
Mirkin: Baseline scenario: continued recovery growth, but at a slower pace than in 2021, and with inflation fading. But both the world economy and the Russian economy will remain hostages of the pandemic.
If “Omicron” or some other new strain will bear more serious consequences for the lives of people, spreading at a higher speed, then the global economy will face a great slowdown.
The main threats are geopolitical risks in the east of Europe, overheated financial markets, sharp countercyclical policies of central banks aimed at bringing down inflation. But it also slows down the growth of economies.
– What is your forecast for the prospects for the Russian economy in 2022?
Inozemtsev: In my opinion, the year as a whole will be quite good for the domestic economy: apparently, commodity prices will remain at high levels, the government will strive to maintain the living standards of the poorest segments of the population and implement large infrastructure projects, investments in which will also be in that or otherwise reach the pockets of citizens.
At the same time, I do not expect a sharp slowdown in inflation (it is unlikely to fall below 6-6.5%) and rapid economic growth (I believe it will be + 2.5-2.7% of GDP by the end of the year). Russia will develop more slowly than the world as a whole – but the coming year will still be a year of growth, not a crisis.
Geopolitics can threaten this state of affairs: the aggravation of the situation around Ukraine, the annexation of Belarus, or even greater confrontation with the West with subsequent countermeasures can break the precarious equilibrium in the economy. Although, in my opinion, the chances for such a development of events are still small …
Shibanov: We will continue to grow, but at a much slower pace than in 2021. Probably, the GDP will add about 2-2.5%, and the increase in wages will slow down. The volume of consumer lending will continue to expand, inflation will gradually decline and by the end of the year is likely to approach the 4% target desired by the Bank of Russia.
Mirkin: A lot depends on external factors. In the case of the baseline scenario (continuation of the recovery growth of the world economy) – we will be in “chocolate”. If the “black swans” appear, then the big question is where they will take us. The pandemic, world prices and demand for raw materials, the volume and types of new sanctions from the West, the dollar against the euro, the hot money of non-residents that “sit” in the Russian economy – all these are external variables that determine what will happen to us in 2021.
But the most serious problem for Russia is the “natural decline” of the population in hundreds of thousands of lives per year. Here, perhaps, all that remains is to pray.