Russia’s Burgeoning Balance of Payments Surplus Not a Good Sign for Russians or Russia, Economist Says

Paul Goble

            Staunton, Aug. 11 – The Russian Central Bank reports that Russia’s balance of payments picture continues to set records despite sanctions with Russian exporters earning more from sales abroad and importers buying less for sale within the country (newizv.ru/article/general/11-08-2022/dengi-est-a-kupit-nechego-pochemu-v-strane-zafiksirovan-rekordnyy-platezhnyy-balans).

            But economists warn this is not good for Russian consumers or for the country’s economic prospects. On the one hand, it means that Russians don’t want to purchase Russian alternatives to foreign goods which are no longer available. And on the other, that in turn means that there is not the boost in earnings Moscow expected that would allow the economy to grow.

            St. Petersburg economist Dmitry Prokofyev points out that the Russian Central Bank has put out a wide variety of explanations but the only one that fits is that there has been a dramatic decline in the amount of imports and no similar decline in the amount of exports, most of which are in the raw materials sector.

            “The authorities in Russia imagine the economy as a ‘pool with four pipes’ - resources flow out through one ‘pipe,’ money flows in through another ‘pipe,’ money flows back through the third ‘pipe’ - to where via the fourth pipe,’ goods flow in,” he says.  The trick is to keep these in balance, and Moscow has far greater power to affect the last than the other three.

            That this is what is happening, Prokofyev says, is proved by the fact that savings rates by the population have doubled from ten to 20 percent of income. People have money but they no longer are being offered goods that they want to buy. That means their consumption is dropping, and it also means that the earnings of domestic companies are falling.

            As a result, what the Central Bank is trumpeting as a victory is in fact a double defeat -- for the Russian people who no longer have access to good they want to purchase and for Russian firms who can’t earn the profits necessary to modernize and develop. But because Russians have plenty of money, the Central Bank thinks it can celebrate rather than worry.