Summary of "Грядет год больших потрясений. Олег Вьюгин - Алексей Мамонтов"
Discussion with Oleg Vyugin on Russia’s Economic Outlook
The video features an in-depth discussion with Oleg Vyugin, a prominent economist and former senior official at the Russian Ministry of Finance, Central Bank, and Moscow Exchange, about Russia’s economic outlook amid rising budget deficits, slowing growth, and fiscal challenges heading into 2026.
Key Points and Analyses
1. Budget Deficit and Fiscal Challenges
- Russia faces a growing budget deficit, projected around 6 trillion rubles by year-end, down from earlier estimates of 8 trillion.
- Government revenues are falling in both oil and gas and non-oil sectors due to economic slowdown and reduced trade activity.
- Expenses remain high or are increasing, forcing the government to resort to all possible measures to close the gap: raising VAT, lowering tax thresholds, introducing new excise taxes and fines, and increasing borrowing.
2. Tax Policy and Economic Growth
- Despite the economy slowing sharply (GDP growth dropping from 1.6% to near zero or negative), taxes are being raised rather than lowered, which is contrary to typical economic stimulus practices.
- This tax increase in a slowing economy risks reducing tax collection further, potentially worsening the deficit.
- The Ministry of Finance forecasts modest 1% growth, but experts and lawmakers view this as overly optimistic.
3. Financing the Deficit and Monetary Policy
- Market borrowing is expensive due to high interest rates (around 15-16%), and the government is increasing debt, including issuing bonds denominated in yuan, though demand for these is limited.
- Monetary financing (printing money) is likely to be used more, risking inflationary pressures conflicting with the Central Bank’s high interest rate policy aimed at controlling inflation.
- The Central Bank may have to maintain high rates longer, potentially until 2027, to manage inflation expectations.
4. Ruble Exchange Rate Dynamics
- The ruble is relatively strong (around 80 per dollar) due to a large trade surplus and high interest rates attracting capital.
- However, this strength hurts export revenues and tax collection, contributing to budget shortfalls.
- The Central Bank has reduced currency sales, but foreign currency reserves are dwindling, limiting its ability to influence the ruble’s value.
5. Impact of Sanctions and Oil Export Restrictions
- New sanctions, especially restrictions on oil exports, complicate Russia’s foreign exchange earnings and put downward pressure on the ruble.
- Russia is expected to rely on shadow fleets and indirect mechanisms to continue oil exports, with China and India playing key roles as buyers at discounted prices.
6. Investment and Inflation
- Private sector investments tend to be effective over a medium-term horizon (3-10 years), but government investments often lack efficiency and transparency, sometimes leading to waste or corruption.
- State investments in infrastructure and the military-industrial complex are politically driven and not always economically profitable, requiring better control and possibly privatization to improve efficiency.
7. Financial Sector vs. Real Economy
- The financial sector, especially banks, is showing record profits due to high interest rates on corporate loans, while real economy companies suffer from expensive credit and declining profits.
- The Central Bank is tightening credit restructuring rules to prevent a wave of bankruptcies among indebted companies.
- Attempts to tax or redistribute bank profits have been rejected to avoid destabilizing the banking system.
8. Long-Term Economic Role and Infrastructure Projects
- Proposals to develop Russia as a logistical bridge between Europe and Asia, including a speculative tunnel linking Russia and the U.S., are currently unrealistic without strong trade ties and political will.
- Such mega-projects depend on Russia becoming a major trading partner with the U.S. and China, which is not the current situation.
9. Outlook for 2026 and Beyond
- The economic outlook is pessimistic, with a high risk of recession and worsening budget deficits.
- The government faces tough choices: either enforce painful budget cuts (sequestration) leading to a short recession and eventual disinflation, or continue monetary financing risking chronic inflation and economic instability.
- Political priorities may override economic rationality, especially if emergency or military conditions arise, leading to a “military economy” scenario.
10. Advice to Citizens
- Given the uncertainty and expected upheavals, citizens are encouraged to remain optimistic and proactive, as individual resilience will be key.
Presenters and Contributors
- Oleg Vyugin — Guest expert, economist, former senior official in Russian finance and banking sectors
- Alexey Mamontov — Host
Category
News and Commentary
