The country is gradually emerging from isolation. What happened to our economy during these months? What is the overall picture? Which industries die, some survive? Effective measures of state support? This “Spark” has talked to Valery Mironov, Deputy Director of the Institute “development Center” HSE.Interviewed by Alexander Trushin— “Then we began to count wounds”, as the poet said. So, Valery, what is happening now with our economy coronavirus after a storm?— In short: the recession, that is relatively moderate, uncritical slowdown, production continues. And will continue for another few months. Now we have got the economic data for may. In General, the decline has increased from 11 percent in April (compared with the same period last year) to 12 in may. But the overall picture is very colorful. The main driving segment of the economy — industrial production declined in may to 9.6 percent, and in April the fall was 6.6 percent. But everything is not easy. In may sharply decreased the production of oil and gas these two industries are unhappy each in their own way. From may 1 to the agreement with OPEC, we started to reduce oil production (we all remember the scandal that happened in March at the session of the oil-producing countries). Then came the negotiations with the US and Saudis, and in the end, Russia was forced to cut oil production by 17 percent. The decrease in production in the oil industry — a factor completely “man-made”. The same thing happened with gas production in may fell. It was a warm winter, and Europe increased reserves. Then came the threat of a gas war with Ukraine, and European consumers too, just in case have filled their store. In short, in may, our national treasure us up and added the same 3 per cent to the overall fall of the industry. If this factor is not considered, then production in may remained approximately on the same level as in April— minus 6.6 percent year-on-year. So we are experiencing a perfect storm in which there were several adverse factors, mutually reinforcing each other. The coronavirus is one of them.— And what picture is on the branches?— In the manufacturing industry with the largest decline in the automotive industry — this industry fell by 42.2% in may compared to the previous year, in leather production (minus of 35.1) and the manufacture of vehicles (minus 28,2). In obvious leaders of growth — pharmacology (with a growth rate of more than 22 percent year-on-year) and chemicals production (due to the release of a detergent and antiseptic), manufacture of food products. And, unexpectedly, manufacture of furniture showed an increase of 2.2 percent. Furniture was the only one among all major sectors, who began to play April’s double-digit failure. It can beem to be associated with the production of furniture for the new hospitals and the first “green shoots” of new structural trends, such as housing (especially country), smart home technology, remote office and everything to do with the concept of “second home”. This industry can show accelerated development in postpandemic period. Although the overall construction is still in the red.— But industrial production is not included in the government list of 12 “most affected”. Why?— See this list of the government included mainly the sectors of transport (road and air), tourism, leisure and entertainment, culture and education, non-trade, dentistry, fitness, etc. All of them have reduced their activities according to the decree on quarantine and isolation. The transport sector should be supported, it certainly. And air freight fell by 90 percent, too. But now they are recovering. We need to support education and culture. With regard to tourism and entertainment, the government is not particularly on these industries and spend — at a minimum, basically giving subsidies to the payment of salaries that companies do not fire people. The level of consumption in the country is declining, incomes are reduced, people begin to save. First and foremost, on fun. Most likely, the quarantine will not work half of the restaurants, fitness centers, and entertainment complexes.— And what happens to incomes?— There are no news: they are five years of decline, and only in the past year this process has stopped. According to our estimates, this year, we should expect them to fall by 7-8 percent. That’s a lot. In past years, revenues were down 0.5–1 percent per year. Reduced consumer demand. And he gives half of the increase (or reduction) of GDP. The decline in demand by 1 percent gives minus half a percentage point of gross domestic product. Demand falls by 8 percent minus 4 percent of GDP. There is another important point. Now people are trying the money they get, not to spend but to save. But with the savings, the situation is bad. They have half of the population is almost zero, only enough to live a month or two. People very much depend on salaries that they receive from the companies. But there is a big problem. Despite the government promised tax breaks, subsidies, etc., people still translate either part-time or sent on unpaid leave. And the number of officially registered unemployed has increased in 2 times. True, people went to the employment service, because the increased unemployment to 12 300 rubles. This, of course, the level of survival. Many help benefits for children. If a family of three, parents receive 12 thousand per child — 10 thousand, a total of more than 34 thousand rubles, well how to stretch the money that you can. But no more. But it is important not only how much people get, how they manage their funds. And they, again, save every penny. And the money in the economy is not going.Photo: Gleb Schelkunov, Commercants understand ahead — uncertainty. This forces to save not only people but also enterprises. Companies are afraid to invest, they now not invest in production development. The decline in consumer and investment activity is today the two main woes of our economy. And the problem is not the lack of money. They are! Enterprises in the years of good oil prices sent earnings on investments, store them in banks. On the same notice, reason — there is no confidence in the future. And the banking system also has accumulation. But nobody invests. Those banks are not too eager to give companies long-term loans, even if the reduction of the key rate, because it is unclear how the situation will develop further. Although the mere existence of the reserves shows that while the situation was not desperate.— And how could it happen next?— Our forecast is very brief. According to our calculations, in the third quarter, the economy will fall by about 9 percent over the past year. The industry will cut production by 7 percent. Figures fall from month to month add up?— No, we compare the dynamics of GDP and industrial production from the same period last year, with the base. And it can vary one month of the year can be strong, another is weak due to a variety of factors. But comparison of the figures in its pure form is not always accurate, so in the statistics used methods of “removing seasonality” to more objectively compare the dynamics of the current year with the past.— And what to expect after the third quarter?— No one knows what the letter of the Latin alphabet will the development of the crisis — whether V, or W, or L. the most favorable option in September can begin the recovery, and we’ll win back losses 1% per month. But the odds of that very little.
More than likely other scenarios. No one now would say with confidence whether the second wave of coronavirus is questionable. But the continuation of the economic crisis more likely. So, wait… the second act Is imminent?— Even more so. This international experience. In the past year, the world Bank report “Global economic prospects”, dedicated to the decade of crisis of 2008-2009. The report presents the experience of several crises of 1972, 1982, 2001 and 2008. Conclusion: all the global recession spilled over into a financial crisis. I think the current situation is no exception, neither for us nor for the world. I said at the beginning of the recession in our economy. It is likely that we have a financial crisis.— And you didn’t mention the crisis of 98-th year… He was not global. The crisis affected the Asian tigers and Russia. That is why it is called “Russian vodka” — perhaps then our country was associated with the national drink. But generally, financial crises, further undermine the economies of developing countries, because they had to devalue their currency. And losses of the company and the company had debts in us dollars or other stable currencies. It is typical for our country. Our oligarchs in 2008 was still not too experienced in management, got to his ears in debt. In order to return, they needed more money in rubles. But the recession is not allowed. Because we had our good government to bail out large companies, and metallurgical, and oil, and other. All the “efficient owners” then saved at public expense. It was a mistake. It was necessary to take away property, which the owners unwisely disposed of. Now, it seems, the government saves not all, still something we learn.— But all governments for their support in time of crisis… Yes, but not only on the principle of “too big to fall”. In the developed countries was still the rule of “money in exchange for the property.” The British government in 2008 helped the six largest banks, buying packets of shares. Five of them then these shares regained. One Bank remains in state ownership. But later it was privatized, and the state got a lot of money. Now did the government of Germany, buying shares of “Lufthansa”. However, I took a little package. But in any case, the anti-crisis policy is very important. In developed countries in the crisis period allowed the bankrupt companies. Instead, come others. Need to make room for “green shoots” of new businesses. We have a policy different: the government is trying to save the company — as in the last crisis, and in this. In 2008 we restructured the economy, and this was a very great need. As a result, after the crisis, the world economy grew at 2-3 percent per year, and we added only 1 percent.— Why, in fact, it is better to rebuild the structure of the economy, and not to keep what they have?— And the restructuring is already underway, it’s inevitable. For example, I have already said, dramatically moved forward the pharmaceuticals in which we are far behind the world leaders, as well as the production of chemical products, furniture. Because these products were in demand. It should be borne in mind also that now there are new processes in the world economy. Ends of offshoring, when produced, or the Assembly of complex��the Elia of components or manufacturing of clothes and shoes, were transferred from developed countries to Asian regions, because there was cheaper labor. Now this advantage is lost. In addition, there is the robotics industry. Robots are quite capable now to assemble cars. And even sew a shirt. Yes, still in the garment industry needed a human hand with a subtle tactile sensations. Now it is available to the robots. So there comes a time reshoring — to return to production in regions where traditionally it has been developed for the processing industry, and yet relatively inexpensive workforce. In relation to the developed countries is Eastern Europe, Ukraine, Belarus and Russia. In other words, production will move closer to consuming regions. In this sense, our country has a very good chance. We have manufacturing and technology, we have educated staff who is ready to work in the digital environment and robotics. We have a cheap labor force — in currency terms. And we have a huge market, yet filled with imported, mainly Chinese, goods.— So, our future exceeds all expectations?— If we fulfill two conditions. First — hipsters, as well as employees of restaurants and other entertainment venues, those without work should become producers. And the second is a need to try to have relationships with the world, to become part of reshoring. We must finally learn to fit into global chains of value added production that ensures the welfare of the population.We are waiting for the “viscous” kriticheskii the end of the second quarter of this year economic decline by 10-12 percent. These are my calculations, and they may not coincide with other sources. More affected the service sector, and less industrial production. The government in a timely manner and quite professionally prepared plan for economic recovery. But I think it would be better the plan is divided into two parts: first — the elimination of the consequences of the crisis and the second output path of sustainable growth. This is a different problem, and, accordingly, it is necessary to divide the anti-crisis measures and measures to stimulate development.About the first problem. The society suffered losses due to the pandemic coronavirus, and will have to accept. Neither people nor businesses this is not objectively guilty. Was declared a state of isolation. The loss should be covered from public money either through direct funding or tax deductions (for businesses and for people). You just have to compensate for the losses, and the more the better. Here the views of economists differ only in what the scale of losses and how much the state can afford to allocate money from The national welfare Fund or by borrowing on domestic or foreign markets. The assessment of such compensation vary from 3 to 8 trillion rubles.And the government is on the whole economic recovery plan has allocated 5 trillion rubles. However, there is a “direct account”, that is losses and funds spent. Apparently, this is only the initial figure is likely money will need more.According to my projections, this year we have a decline in GDP of 6-7 percent. In the next and in 2022 we can expect a slight increase. The level of 2019 we will reach in mid-2023. We are waiting for the “viscous” crisis, which quickly get out will not succeed.About stimulus measures at the end of 2019 has been fierce controversy, in which the Ministry was accused of low growth, the Ministry of Finance with its budget in surplus and the Central Bank with its policy of high interest rates. The pandemic has softened this position. The budget deficit is already expected, that is, the Ministry of Finance the economy will be more give than take. The Bank of Russia seems to agree on the zero neutral interest rate, but before such a call rate of 1.5–2 percent (the neutral or natural rate, ensuring full capacity utilization, while maintaining the level of inflation.— “On”). The other important thing is the reduction of social taxes (taxes on labor). This measure was discussed in 2016, but then forgot about it. The key question today is whether this incentive permanent or it will cancel two or three years.The government is still inclined to support individual sectors, which, by its design, can become the drivers of development. But is it possible to secure high growth only at the expense of the IT industry? Unlikely. If the money will go only there, the case will soon be over what the pros call himself enterprise, far from “numbers”. The more that we’ve done. Was the idea of relying on aerospace technology, nanotechnology. Spending money, and the result was not.I think it would be more correctly and systematically stimulate all sectors of the front, and not selectively. Investment incentives to enter once for all. To reduce social taxes to 15 percent, as is now done for IT, also. We have this tax one of the highest in the world. And if it is to lead to a reasonable level, it would stimulate investment and would increase wages, and would have increased consumer demand as the basis of the economy.Experiment with vigevanese crisis has a very high degree of uncertainty. And the task of the state in such circumstances is to maximally reduce it. But while the actions of the government of this state, on the contrary, only reinforce. From March to June were announced several packages of state support of enterprises and households. First, small and medium enterprises on��more affected sectors were granted a deferment on taxes for 6 months (excluding VAT). When it became clear that as soon the crisis is not over, allowed to pay taxes in equal installments during the year. In April, has added a small free assistance to those same businesses to pay salaries to employees.In principle, industry has been defined correctly, mainly the services sector, transport, leisure, non-trade, culture and education. The problem is that this help was given in small portions. It’s one thing when you know you are in trouble you will not leave. It’s quite another when you give a little and watching will survive or not. The government has not made the main thing: tried to create confidence in the success of anti-crisis measures. That is why businesses are looking for ways to survive. Someone to fire people, someone translated them to a shortened week or sent on unpaid leave. Therefore, the uncertainty remained high.I think the authorities made a strategic mistake, identifying the policy objective of maintaining enterprises in the state as it was before the crisis. So did in past crises. But it became clear that the economy is changing. In the same service sector, which is supported by the state, for example, appeared and rapidly developing services to deliver the goods. The demand is huge, they don’t have time to deal with the orders. Such branches and need support to develop. They also create new jobs and provide good wages. Because people are afraid of layoffs because there is no guarantee of employment. People can easily refuse the minimum wage in the old place and moving into a new job with a higher salary. And the employer it will not let go: after all, he received a permanent loan with a condition that will retain 90 percent of the employees until the spring of 2021. And it turns out that this measure will work against the company, preventing it to evolve, and against workers who are attached to him, literally.