"Money is getting smaller." Authorities hope for 80 trillion in savings and easing of sanctions

Elena Petrova, Tatyana Sviridova

After three years of abnormal growth under sanctions and the transition of industry to a war footing, the Russian economy has come to a standstill. The quarterly GDP forecast compiled by researchers at the Institute of Economic Forecasting of the Russian Academy of Sciences shows that compared to the last quarter of 2024, the country's GDP has not grown, but has even decreased by 0.4%.

Maintained domestic demand and rising government spending were able to keep the country from falling into recession in the first half of the year. But if the trend from the beginning of the year continues, the country will slide into recession from July 2025.

"The slowdown in industrial growth to 1.1% in the first quarter of 2025 was due to external factors, weather conditions, and the transition of a significant portion of civilian manufacturing to a reduction in output. Dynamic growth is maintained only in industries that can be classified as defense production. Industrial output excluding defense production fell by 1.7% y/y," the scientists write in their forecast.

Only guns and drones continue to be produced "dynamically". As academic economists estimated the growth of defense-related production, in this part it amounted to 32% . However, scientists can only estimate how the state stimulated the defense industry by indirect signs. Information on this sector is closed. But the fact remains a fact, Vladimir Salnikov, Deputy Director General of the Center for Macroeconomic Analysis and Short-Term Forecasting, said in an interview with Novye Izvestia:

— And if we talk about industry, then in the last two years or so, growth has been provided by those industries in which the defense sector predominates.

The 32% growth is explained simply: while the rest of the economy has no other sources of financing except for huge loans at 30% and higher, those who fulfill government orders receive not only money from the treasury for the products they produce, but also preferential loans.

These funds are returned to the economy only in the form of wages for workers employed in the defense industry, but compared to the total amount of funding, this is a significantly smaller portion of what was spent. As economist Igor Yurgens noted in an interview with NI, "the guns themselves are not sold in stores."

Things are not going well in other industries.

If we do not count the main beneficiary of the country's chosen political course - the military-industrial complex, the list of affected industries is much longer than those that are doing well. The chemical and food industries are doing well, says Vladimir Salnikov:

— The food industry, although they have, admittedly, slowed down recently, but overall, if we take a deeper look, it is a steadily growing sector. It only began to slow down in the second half of 2024. The crop failure had an effect, prices were rising, which did not contribute to the growth of demand. This year, the resumption of growth in food production largely depends on this year's harvest. If the harvest is good, then processing will additionally stimulate the sector, it will continue to grow.

But these sectors can safely be considered as exceptions.

"Mining production fell by 3.7% due to a reduction in oil production (-4.3% under the OPEC+ agreement) and gas (-5.9% due to a reduction in exports and domestic demand). Under the influence of warmer weather, the production and distribution of electricity, gas and heat decreased by 2.1%," the researchers from the Institute of Economic Forecasting of the Russian Academy of Sciences list.

— Automobile, tobacco industry. Well, and some industries that were largely tied to exports to unfriendly countries, especially to the EU. For example, wood processing. All mining suffered. But it is clear why mining suffered. Oil and gas... these industries were mainly burdened by sanctions, — recalls Mikhail Golovnin, Director of the Institute of Economics of the Russian Academy of Sciences.

The government believes that GDP growth by the end of the year will be 1.2%. This is, of course, significantly less than last year's 4.3%. But there is a caveat - in the event of a change in the external environment. If this does not happen, the authorities will have to deal with "maintaining growth" as such. The fight against recession will begin.

The state hopes for increased investment and consumer demand. And again, the authorities are casting their gaze not only on the Central Bank, which should lower the key rate and make loans and consumption accessible, but also on bank deposits.

According to the latest data, the population has 80 trillion rubles in hand - a sum equal to two annual budgets of the country. Since the beginning of the year, this sum has increased by 10 trillion.

— We do have 57 trillion rubles in the population's accounts. But let's not forget about the 18 trillion in cash. This primarily explains why there is such a sum. Plus, if we take into account the addition of digital currencies, we come to a sum of about 80 trillion rubles in ruble equivalent, — says Igor Nikolaev, leading researcher at the Institute of Economics of the Russian Academy of Sciences.

It is clear that the lion's share of this money does not belong to ordinary people. The median salary in the country has not exceeded 55 thousand per month. This means that half of the population earns less than this amount and they have nothing to take to the bank, no matter how high the bank interest rates are, economist Nikolaev reminds:

— No less than half of the population has no savings at all. They would be happy to spend, if only there was something to spend. And the other half has something to save, and they save. Yes, they will spend, but that's only half of the population.

There are at least 20 trillion under their pillows and in crypto wallets, but the state can’t get to them. This is either the last reserve that people will spend in the most extreme case, or income that they cannot explain to the tax authorities.

Less than 1% of Russians own 92% of the total amount of deposits. In fact, we are talking about the richest and their money. But the state cannot force them to part with their money for many reasons. Firstly, power and capital are too close in the Russian Federation. Secondly, the more money someone has, the easier it is to withdraw it to safe havens in case of danger. Despite the sanctions, there will always be workarounds. Such people need to be encouraged to spend money within the country and invest it in the Russian economy. At least while there is still money in the budget.

Consumer demand drives the economy to grow, but, oddly enough, for it to work, the government first needs to invest.

— Our National Welfare Fund is already 2.8 trillion. We can zero it out by the beginning of 2026. It turns out that the driver needs money, and there is less and less of it. The budget stimulus is a temporary mechanism. No matter how rich the country is, you cannot support it for many years by pouring in huge amounts of money. There simply won’t be that kind of money. You are forced to raise taxes, which is what we did. And this slows down the economy. Natural limitations for such a model of economic growth are triggered, — Igor Nikolaev reminds.

If the geopolitical situation does not change, the population will face a second tax increase. This is a much simpler way than any form of withdrawal of savings.

Therefore, let us rely on peacekeepers.