Since the beginning of the war against Ukraine, the Russian authorities have classified or simply stopped publishing a large part of statistical information. This includes data that the enemy could use to their advantage (for example, on oil production and processing), as well as indicators that clearly indicate problems (such as the dynamics of population decline). The data that remains freely available is presented only in a positive light. But as the economic situation worsens, it becomes increasingly difficult to find positive information. Officials still cope with this task, approaching this task creatively.
Selective presentation of statistical data
Russia is finding it increasingly difficult to balance a budget inflated by colossal military spending. The deficit is growing regardless of the tax increase, and at the same time the government is increasing the state debt.
About 9 percent of the budget is currently spent on its servicing. For comparison: less is spent on education and healthcare. And that's not all: debt servicing costs will continue to grow, which is why education and healthcare spending will have to be cut even further, and taxes will have to be increased again. This topic, of course, is not convenient for the authorities, but President Vladimir Putin found a way to present the state of the budget in a positive light. "State finances remain stable: in June the budget had a surplus of 196 billion rubles. An important role in this was played by the increase in budget revenues, and not only from oil and gas, but also from other sectors," the president said.
After the series of reports of a growing deficit, this sounds like good news. But it is manipulation, and Putin cannot help but understand it. He has been at the helm of the country for more than a quarter of a century and knows very well that budget expenditures are distributed unevenly throughout the year: at the beginning the deficit grows, in the summer tax revenues correct things, but at the end of the year the final jump comes.
Even taking into account the surplus mentioned by Putin, at the end of the first half of the year the budget gap amounted to 5.7 trillion rubles - more than for the whole of last year. And there are forecasts that by the end of the year it will reach 7 trillion.
Free interpretation and substitution of concepts
The logic of some economic processes can sometimes sound contradictory: what in the minds of the average person looks like success, in fact turns out to be a symptom of a crisis. For example, rising inflation is perceived as a problem, and its decrease - as something positive. But this is true only to a certain extent. Extremely low or zero inflation is not something positive. If prices do not grow, this indicates a lack of demand. There is no growth in demand - there is no development. Another example is unemployment. High unemployment is a problem, but extremely low unemployment is also not a good sign. In June, unemployment in Russia was 2.2 percent, in May - 2.1 percent. This indicator has never been so low and Putin does not fail to mention it, while making comparisons with other countries - that in the eurozone unemployment was 5.9 percent, and in the USA - 4.2 percent.
From Putin's words, one might get the impression that the listed countries are trying to catch up with Russia, but are not succeeding. This is hardly the case, but in fact, the record low unemployment is evidence that there is no free labor in the economy. 2.2 percent is only 1.7 million people. Moreover, some have fallen into the statistics due to changing jobs, and others simply do not plan to look for work. The effect: the shortage of personnel prevents enterprises from increasing production.
The head of the Central Bank, Elvira Nabiullina, regularly calls ultra-low unemployment "the main constraint on the Russian economy." In conditions of a shortage of personnel, companies are forced to raise wages faster than labor productivity grows, which fuels the inflation that financial authorities are fighting.
Recourse to alternative indicators
When no trick helps to extract positive news from traditional indicators, alternative ones are used. The general audience often does not understand their meaning, but the numbers are impressive. One of these indicators is GDP at purchasing power parity, which has been used especially often in recent years.
"In terms of purchasing power parity, Russia is in fourth place in the world after China, the United States and India. And it is in first place in Europe," Vladimir Putin recently said.
And this is true - the World Bank ranked Russia in fourth place. Moreover, before the war, Russia was in sixth place, but then it overtook Germany and Japan. However, what GDP at purchasing power parity is, how this indicator is calculated and what it is used for - this is not specified.
Here is the explanation: GDP is calculated in the national currency and then converted into dollars so that the economies of different countries can be compared. GDP at purchasing power parity is based on a conditional "basket" of goods and services, checking how much it costs in different countries. The ratio between the value of this basket in national currency and its value in dollars gives a coefficient by which the country's GDP is converted into dollars for final comparison. Since prices are lower in poorer countries, their GDP at purchasing power parity turns out to be significantly higher than the nominal one. This is what allows them to occupy higher places in the overall ranking. Russia is a prime example of this.
Comparing poorer Russia with richer Germany, one might feel proud of the fact that Russia's GDP in purchasing power parity is higher. But what does this say about economic power or the standard of living? Almost nothing.
Inventing a "new language"
When it becomes impossible to ignore reality and disappointing news must be reported, the authorities resort to euphemisms. They allow them to soften the negative effect or even create the impression that there are no problems and everything is going according to plan.
The most famous example in this regard is "negative growth". This concept was first used to characterize the prospects of the Russian economy in the conditions of the pandemic. The term is correct, but outside the professional context it seems foreign - the word "recession" is much more appropriate when speaking to non-specialists.
In this case, "negative growth" is just one of the examples. Speaking about the reduction in investments by Russian companies, Putin uses the phrase "investment restraint". And he notes: "There is no investment pause, the investment process continues".
By the same logic, the growth of prices began to be called "change", and the stagnation in the Russian economy became "controlled cooling", which "naturally leads to an expected slowdown in the growth rate". The words "controlled" and "expected" are obviously intended to show that the situation is under control.
Author: Oleg Loginov