Thread by @samagreene

While we wait for the protests to kick off, it's worth spending a bit more time looking at the economic aspects of Putin's speech today.

TL;DR: It's underwhelming, but informative.

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For context: Broadly speaking, Russia has an economic problem, but not a fiscal one. The budget is in deficit but the fiscal position is strong, as are reserves, and the country can afford to borrow (even despite US sanctions on sovereign debt).

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GDP growth is unstable and anemic -- the headline projection of 3.8% is unimpressive, given what happened in 2020 (and projections of 5-6% in more mature markets).

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More problematically, most of that growth settles in the pockets of corporates and the super rich, rather than individuals. Thus, real disposable incomes (after inflation, rent/mortgage, taxes and utilities) have remained flat since around 2014.

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Putin and his team have long prized sound fiscal and monetary management, and they do that well. Russia's budget has remained austere -- and even with all of the spending announced today, spending as a portion of GDP is likely to stay restrained.

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But it's worth looking at where the new spending will go. A chunk of it will go to direct payments to individuals, which will of course be welcome by those individuals, but these are not amounts sufficient to spur a consumption boom.

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This is in keeping with long-standing policy: Aside from pensioners and civil servants, the gov't avoids too much involvement with ordinary Russians' pocketbooks: income taxes are low, and so are welfare payments.

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Likewise, the gov't largely avoided replacing incomes lost during the pandemic (leaning instead on employers to keep paying people).

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A lot of the direct investment Putin announced is focused on building or repairing things: schools, museums, apartment buildings, and, to a lesser extent, roads. A lot of this is badly needed, but very little - except maybe the roads - will have a real impact on growth.

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The announced spending will, however, move a lot of money - from both public and private coffers - into the hands of the construction sector, which has become an important part of the polit-econ food chain, competing with resource co's and banks for rents and influence.

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Other moves may help spur a bit more investment, in two ways. One is to subsidize lending, for housing, infrastructure and tourism. Another is to move sub-sovereign debt onto the federal books.

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Using the ability of the fed gov't to borrow more cheaply than anyone else in Russia does make good sense, but it's impact is likely to be limited -- not least because the beneficiaries will mostly be other parts of the gov't and well-connected corporates.

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Unless I missed it (and please flag if I did!), Putin said nothing about boosting business investment, productivity, trade, etc. In other words, it was all about reallocating money that is already in the economy, rather than creating new productivity and prosperity.

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Now, don't get me wrong: redistribution is great, and there's a lot of room for it in Russia (as in the US, UK and a lot of other places). If done on a large enough scale, moving money from the top to the middle and bottom of the economy could create a lot of new activity.

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But nothing proposed today speaks to that level of redistributive ambition -- and nothing suggests that Putin is about to go after the elite's sources of rents.

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Perhaps most telling, then, is the fact that Putin said nothing about the impact all of this would have on the economy overall: nothing about rising growth or incomes, nothing about the number of jobs created. Just the amount of homes built and money handed out.

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Gone are the days of "catching up to Portugal" in per capita GDP, or doubling GDP overall. Absent are the ambitious targets for reducing poverty and improving standards of living.

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What Putin did not do today -- and what he has not done for some time -- is offer Russians a vision of the future that looks like anything other than a continuation of the present.

/END