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[music] [music] The authorities were not ready to make this choice, not yet ready. This is a strong enough move. It will change a lot in the country. All economists would say: "This is a catastrophe." There is no money. The economy is entering the twenty-sixth year with zero growth. At the same time, it is entering with increased taxes, which, no matter how we reason, have a depressing effect on the economy. Taxes are always bad. There will be no such salary growth anymore. The authorities are trying to rebuild Russian society from the idea of free entrepreneurship [music] to some other model. I don't even want to describe it now. This is a nationalization not of enterprises and assets, but a nationalization of elites. The economic situation is changing in ways that were not foreseen. A powerful Black Swan will arrive, and, I don't know, Rosneft and Lukoil will not be able to export oil at all. Everyone says: "Well, here it comes, it will fall soon." It's not falling. [music] Hello, this is For Pstock. I am Anton Zhelnov. I am glad to welcome you, our viewers, and Oleg Vyugin, a well-known Russian economist, professor at the Higher School of Economics. Oleg Vyacheslavovich, good afternoon. I am glad to see you again at Forbstok. >> Good afternoon, >> Oleg Vyacheslavovich. I would like to start with the budget, which is being adopted now for 3 years. And my question is that in recent years, the budget has been finalized with a larger deficit than initially planned in the budget project. And this happened this time as well. The deficit is widening. Is this because the forecasters at the Central Bank are bad, or do the realities change so quickly that they cannot keep up with forecasting, and the deficit is growing? The economic situation is changing in ways that were not foreseen. >> Yes, >> well, if we talk about the current year, you mentioned the widening of the deficit in the current year, >> yes, >> then they did not expect the effect of the increased rate to be so strong. The profit tax was not collected, which was planned, although the rate was increased. Well, and of course, >> they always count on the ruble being weaker and selling oil and collecting revenues. It turned out that this year, from the planned >> oil and gas revenues, minus 2 trillion. And, accordingly, these 2 trillion have migrated to the deficit. That is, initially it was assumed to be 1.8, or 1.9. According to the plan at all. Then it was increased. You see that taxes are not being collected. And they raised the deficit twice, as it were, the limit. And once, well, I say conditionally for myself, once because of the shortfall in oil and gas revenues, the second time, >> well, or in a different order, because it is clear that the profit tax is not being collected. Therefore, the deficit has widened, and the government did not want to adjust expenditures. That is, they decided to leave it as it is. They even added a little bit. Because of the shortfall in oil and gas revenues. And these latest sanctions from the Trump administration, affecting the oil sector, Rosneft, Lukoil I, how serious are these sanctions, perhaps for the first time so serious that we have not seen anything like it before? >> Well, their effect will manifest a little later. It is difficult to predict the scale. Well, two companies, Lukoil and Rosneft, have been affected, as it were, which were previously given the opportunity to export oil all over the world, to export oil. Rosneft primarily to India and China, and Lukoil all over the world. >> Uh-huh. Uh-huh. >> The question is whether the same methods of circumventing sanctions will be applicable to them as other sanctioned companies have done? Well, Gazpromneft, for example. The question is open. Apparently, there will be some effect, because in any case, everything will become more expensive in terms of logistics. And these companies had very clearly established logistics, and a clearly established payment system. Companies were created that were engaged in reselling oil, receiving money, and sending it to these companies. All of this is now destroyed. This will have to be rebuilt. This means, firstly, delays in exports, and secondly, the cost of logistics. But offhand, I think that they will still export oil in some way, perhaps not on the same scale. How can this affect Russians? I don't know, will it lead to an increase in gasoline prices in the future or >> no? It will not affect gasoline prices in any way. On the contrary, if a larger part of the oil remains in Russia for refining, then there will be even more gasoline. So in this case, yes, on the contrary, gasoline is a different story. It is related to attacks on oil refining. Well, if the companies cannot cope and their exports decrease, there will be less export revenue in Russia, and accordingly, at some point, perhaps the ruble will start to weaken. As a result of this, it has held up all this time. Well, if export revenue decreases, there may be some impulse for weakening, but again, not strong. I may say later in the conversation why. >> Okay, I'll get back to that. I also wanted to ask about the analysts of the Bank of Russia. They believe that the current budget, which is now being adopted, will be disinflationary. And for this, it is important that there is a zero structural deficit. Do you consider this zero structural deficit achievable in principle in today's realities or not? >> Well, the idea of the budget is clear, as it were, how they arrived at it. It is clear that further expansion of budget expenditures is simply impossible. Moreover, we saw that even to maintain the expenditure level of 2006 compared to 2025, taxes had to be increased. And based on this, they came to a sober conclusion that budget expenditures cannot be significantly increased, and therefore, there will be no budget impulse, as it were, right? What we call when budget expenditures grow significantly, by 20% per year, it is an injection of money into the economy. And, accordingly, this may accelerate development, and most likely accelerates inflation, as we have seen. And in this case, the analysts' reasoning is indeed correct. The budget is disinflationary, but under one condition: that all tax plans are fulfilled, that is, they collect, >> increased VAT >> they collect all VAT, all profit >> And VAT applies to profit. They collect all the recycling fee, all excise taxes, fines, and what else was there. There are almost a trillion in fines alone budgeted. So. And if they collect all this money, then the budget will be deflationary. That is, then, according to the Central Bank's plan, it will be possible to start lowering the rate with a delay compared to previous plans. So in 2026, we may see a lower rate in the second half of the year, for example. But the question is whether they will collect it, >> whether they will collect it? Yes. >> Yes. First, if you look at the dynamics of gross domestic product by quarters for the current year, then we have, I think, 1.6 in the first quarter, 1.4 in the second, 0.6 in the third, and it will be negative in the fourth. So the economy is entering the twenty-sixth year with zero growth. At the same time, it is entering with increased taxes, which, no matter how we reason, have a depressing effect on the economy. Taxes are always bad. >> It suppresses economic activity. >> And with an increased rate, the rate remains double-digit, 16%, apparently. So, as it were, companies are squeezed from both sides by expensive money and, accordingly, >> increased taxes. Therefore, most likely, in 2026, the growth that the Ministry of Economy has planned, 1%. >> Economic growth, >> economic growth will not happen. There will most likely be a certain decline, especially in the first, second quarter. >> Well, I calculated it. It seems to me that it will be negative according to my calculations. Then, in this case, it will be extremely difficult to collect the planned taxes. First, VAT, if economic activity decreases, and VAT is a tax on every transaction, then, accordingly, there will be less. And, accordingly, if economic activity decreases, profits will also be less. And the high rate also takes away a lot of profit. Why did they start looking at banks, that they should take something from banks? Because banks earn on the rate, but in reality, this is not entirely correct. The population also earns, and passive assets are also quite expensive for banks. >> Right. But, it turns out that in this configuration, it is impossible to collect what is planned. This is a risk. This is a risk of the budget and monetary policy model that the authorities have built for next year. If revenues are not collected in sufficient quantities, there are two options: adjust expenditures, which is very painful, or increase the deficit. The deficit is planned >> to increase further, >> yes, the deficit is planned. There are some, I hear two figures. On the one hand, 3.8. It seems that in the preliminary documents it was 3.8, but Mishustin said 4.6. I don't know what was meant. Well, let's assume it's around four. This is probably the maximum possible deficit to finance through market means. That is, to attract funds from domestic OFZ loans from the economy. If it's more, then there won't be such passive assets, such a growth of passive assets in the banking system to attract such market borrowings. Then it will be necessary to use repo with state banks again, and this is monetary financing, and then the whole structure begins to falter, because the reduction in the rate is based on the disinflationary effect. And if it does not arise because of this hypothetical situation that I described, the rate cannot be lowered, and then the economy finds itself in the same situation as it was in the current year: a high rate and a lack of budget impulse. >> Oleg Buklemishev in our studio said that he would be very interested to see the budget, because essentially it is how the country will live. And today, the budget is also a political course of the country, not only economic. It is a mirror, yes, and a political course, of course. So if you have certainly familiarized yourself with the budget, and if we talk about the political course, based on this budget that was adopted, what kind of course is it? >> Well, I would formulate it this way: we are not ending the SMO. Well, the political course, as it were, can be described for a very long time and in detail, yes, one can try to be brief. >> But briefly, I would say this: it is the continuation of the SMO, and consequently, it creates tension between Russia and a part of the world. Well, >> it creates, >> it creates or has already created, yes, but it is a process, it continues. >> Consequently, this means that the Russian economy is moving towards isolation. So, indeed, for now, China is more or less positive about economic interaction with Russia. That is, well, in a colloquial sense, it helps. >> Yes. Mutually beneficial, of course, it helps. >> Uh-huh. >> Right. >> But we see that this US government, and the European Union undoubtedly too, is aimed at further pushing Russia towards isolation. Economic isolation, I'm not talking about political isolation. So this means that the budget, as it were, contains the same problems that were in the previous year, for example, or in previous years, namely the continuation of the SMO and increased pressure on Russian revenues from exports, imports, and trade with the world. The only peculiarity of this budget is that now, seeing that there are no resources to increase expenditures by another 20%, the government has made a decision that is simply inevitable: to stop the growth of expenditures. It was simply inevitable. If we had been given a budget with a 20% increase in expenditures, all economists would have said: "This is a catastrophe." So, it will be soon. Now, as it were, this is an attempt to avoid this catastrophe by freezing most expenditures, and raising taxes. This means that the political course is the same, but in terms of financial and economic policy, an attempt is being made to mitigate the negative economic consequences of such a policy. Why do you say that the continuation of the SMO, based on this budget, considering that expenditures on the military-industrial complex, I also saw a report about this and analysts said, are very reduced in this budget? >> No, they are not reduced, in my opinion. They are set at approximately the same level as the current year, with a formal reduction of 500 billion. >> Right. >> But it should be well understood that in the budget of 13.5 billion, which is being executed in the current year, there are, according to various estimates, about 3 trillion in payments to contract soldiers. >> Uh-huh. >> So, we have a contract army fighting, as it were, and, accordingly, these are payments to contract soldiers, payments to families, and so on. So, in principle, we are already seeing this year that payments to contract soldiers are sharply decreasing. And in general, as it were, there is no statistics, but there is an impression that the recruitment of contract soldiers is somewhat decreasing and they are paid less. So this is compensation. If they paid the same and hired contract servicemen with the same intensity, >> then the budget would have to allocate 13 plus. >> Understood. >> Well, maybe 16. That would be a clear continuation of the old policy. Well, a maneuver is simply being made. And, of course, we see that enterprises that work on the production of defense products, military products, are now also expecting to receive less money. If we talk about the increase in VAT to 22%, economists, your colleagues, believe that it is a rather strong, tough measure, but without it, inflation would have jumped much higher. Do you agree with this and why? How can an increase in VAT in the long run slow down inflation? >> Well, perhaps this is what lies at the heart of it. The maneuver of budget and monetary policy in 2026 looks like this. Indirect taxes are increasing. >> First of all, this is VAT, excise taxes, and the reduction of the threshold for enterprises from which VAT is levied. Well, and there are direct fines, for example. Well, well, this is not a tax, but it is essentially a direct tax. And the recycling fee, well, this is a direct tax on the purchase of cars, yes. The idea is this: all of this will lead to a decrease in nominal incomes, wages, and other payments. Simply because more income has been withdrawn, prices for goods or other state services have essentially increased. And this should reduce demand. That is, there is some growth in nominal indicators, but since the price increases, demand decreases accordingly. And the problem of inflation, which was and still is, is that demand exceeds supply. That is, a lot of money is given to unproductive sectors, but supply is stagnating. So, by increasing prices, we are withdrawing money from end consumers. This improves the demand-supply ratio. Inflationary pressure decreases, >> that is, purchasing power decreases, >> due to price increases. So Elvira Sakhipzadovna clearly said that yes, there will be a price increase at the beginning, but it will not be for long. >> At the beginning of 2026. >> Yes. Yes, yes. So, it turns out that we will hit demand, and if the situation improves in terms of balance, then after that it will be difficult to raise prices, and the central bank can start lowering the rate. This is, in rough terms, the logic. Therefore, >> well, the ultimate goal of this model is to curb inflation. >> The ultimate goal, yes, to curb inflation. And if inflation is curbed, then the rate can be significantly lowered, and then economic activity will be based on the fact that money is no longer very expensive, it will start working normally for the economy. >> And the price increase in 2026 at the beginning, this noticeable one, which sectors will it affect, and by how much, >> by what percentage will prices rise? Since it is VAT first and foremost, of course, it will be a spread-out effect. That is, there is experience of VAT increases in Russia, it has already been increased, and the effect was measured. It is, of course, impossible to measure precisely. It was about 1% additional price growth from VAT, and some part went to a decrease in enterprise profits. That is, VAT can be broken down into the end consumer, or into profit. But, of course, everyone tries to shift it to the end consumer, but when it doesn't work, it falls on profit. So, 1%. >> Yes. Well, look, when they increased it, then >> prices first increased. >> Prices first increased, >> and then the inflation began to slow down. >> Inflation slowed down. But it was a completely different country and situation in the country, it has been 5 years. And now the forecast and calculation are the same: we will increase prices, increase VAT, as then, and slow down inflation again. Is this feasible in today's realities, because it is not 2019 now? >> It is feasible under one condition: if the budget deficit is not increased and is financed by non-monetary sources. That is, this structure will be preserved. And if there is a shortfall in revenues, then to fulfill this model, this structure, expenditures must be reduced. Did the authorities have any alternative to raising taxes, the current tax increase, primarily VAT, or not? Or is this an unavoidable and necessary, the only possible option today? Well, the alternative, as it were, would have looked very simple. If taxes are not raised, expenditures would have to be reduced by about 4 trillion compared to the current year. >> Uh-huh. >> That is, if in the current year expenditures will be there 40 or 43 trillion rubles, then for the next year it would have been necessary to plan 38 trillion. Accordingly, 4 trillion would have been necessary. I am giving very approximate figures here. To be deducted from planned expenditures. And from where to deduct them? >> All healthcare, education is in this amount. >> So, it is clear where to deduct from? From defense expenditures. That is, instead of thirteen and a bit, to plan nine. But this is a political decision. That is, it is such a tough political choice. The authorities were not ready to make this choice. This is obvious, we see it from the results. Not yet ready. Well, and then it is a strong enough, indeed, strong move. It will change a lot in the country. Therefore, this decision was made to slow down and hope that everything will be collected and financed. Regarding >> VAT on profit for entrepreneurs who work under a simplified tax system, revenue should not exceed 60 million, and then you are exempt from VAT >> now. Yes. Yes. So >> this revenue is planned to be reduced to 10 million. That is, if your revenue is already 10, you are obliged to pay VAT. How much of a blow is this for small and medium-sized businesses? >> Any tax increase is a blow. The question is whether it will lead to bankruptcy, mass bankruptcy, or companies leaving the market? >> Well, yes, retail in this sense is affected, yes, real estate transactions >> they won't leave. Well, some will leave, but not a mass exodus. >> Why? >> Well, because where to go? As it were, they will just pay more, live worse. >> Right. >> Worse in the sense that their real incomes will decrease. Their personal >> business incomes too. >> But some will leave. For whom, say, this business is not very important or valuable, there are ways to live differently, they will leave. What is proposed will affect very large businesses in terms of scale. Well, the figures are known, 60 million is not a lot of money. >> So, as it were, they will run faster, including from taxes, possibly. Again, this measure, what is it for, if it's a small story, in the sense that the budget won't get much more or much more? >> Well, they won't get much. Well, in the sense, not trillions. How much is VAT there >> Uh-huh. >> for how much is planned? About 1 trillion 300 billion. So, purely from the VAT increase and the reduction of the threshold. What for? >> What for then? >> I think that all this happened. There was such a rush, it may still remain. Since somewhere in the summer, even in the summer, even in the spring, the Ministry of Finance, in particular, as the body directly responsible for state finances, felt that there was a collapse, that there were no longer such funds that we used so well to increase expenditures. So, something had to be done. And as the situation progressed towards autumn, it became clearer that the collapse was significant. So, apparently, as it happens in the Russian state, a call was given by the ministry to look for resources, look for reserves, look for resources. >> Therefore, we can now observe that many ministries are coming up with initiatives that, in the end, as it were, should provide revenue to the budget. Well, for example, the last initiative, it does not apply to the next year, it is to introduce a fee for technological goods. >> Uh-huh. >> Like 5,000 rubles for each smartphone, refrigerator, etc. sold. >> What is this? What is it for? Formally speaking, it is to collect money and help develop Russian enterprises that produce. >> And informally? >> And informally. This is simply an answer to the slogan: "And what have you done for your homeland?" Well, I proposed to introduce 5,000 rubles. This will be 300 billion immediately in 2027. This is where it all comes from. So everyone is looking. >> Officials or deputies. >> They all have a task >> to replenish state revenues. >> And whoever comes up with what. >> And whoever, yes, comes up with it. If you don't come up with anything, if you behave passively, well, you won't be fired, of course, but it's not welcomed. Therefore, there are also searches for expenditures, but there are simply fewer opportunities for maneuver, but they are also looking there. So, this does not pursue the goal of economic growth. >> Understood? >> It pursues the goal of budget balance. When, in your opinion, and under what circumstances, can the Russian economy start to grow, rather than go into the negative, according to the forecast, for the next year or, well, not stagnate, right? And when can this happen, in your opinion, should the conflict end, the SMO end, >> or foreign investors return, but they clearly won't return quickly. Then what is the growth, what is the growth point for an economic breakthrough today? Well, >> this is a rather complex question in terms of calculations, but one can also reason qualitatively. So, what drove the Russian economy after February 24, 2022? >> Uh-huh. >> It was largely driven by the use of accumulated resources. The Russian economy entered this period with a very large reserve of profits for enterprises, with a sufficiently solid amount of money in the National Wealth Fund, and generally in a state where there was a lot of money, yes. Plus, after the start of the SMO, oil prices were very good. There was such high price growth and there were essentially no major sanctions on oil exports, and the country received huge revenues from exports. So, this wealth was thrown into the economy, but it was mainly thrown in through increased military spending, and this undoubtedly led to growth. >> Uh-huh. >> But since, say, throwing in such funds as the National Wealth Fund has an inflationary effect, because otherwise it would have to be mirrored, that is, to sell currency, and there was nothing to sell, the central bank's reserves were frozen, >> it had an inflationary effect. And these years up to twenty-fifth, essentially, we were growing with economic growth and inflation growth. So now, in the twenty-fifth year, this could still be predicted in the past, in the twenty-fourth year. I predicted this, I'm boasting, probably, that >> that it came true, >> that decisions would have to be made, resources would run out, and decisions would have to be made that could not be made as easily as before. And, essentially, for economic growth to continue, these resources are gone. So, the economy must now start to reproduce them itself. And for this, of course, it is desirable to stop the SMO, whether diplomatically, I don't know, in some way to resolve this issue. This will free up resources, perhaps not large ones, but it will free them up. And this will reduce the logistical pressure on Russian exports and imports, essentially, because, after all, all the diplomatic negotiations we have heard included a component of lifting sanctions. This can be a source of economic recovery. Lifting logistical restrictions, >> lifting pressure on the economy through unproductive use of resources. And this can cause, as it were, give an economic impulse to growth. It probably won't be very huge, serious, because it's not just about technology, as it were, but also about how entrepreneurs assess the future, how they look at the future, whether they live for today, or whether they plan. This is also a very important point. And here, everything does not depend solely on the SMO. Here, it still depends on such a current policy. Domestic policy, which is built on rather restrictive decisions, often restrictions that are non-economic in nature. I mean in terms of motivation. >> Uh-huh. Because we see that essentially in domestic policy, the authorities are trying to rebuild Russian society, to change it, as it were, from the idea of free entrepreneurship, which began in the nineties and continued in the two thousands, >> to some other model. I don't even want to describe it there.
I want to describe it now, but the meaning is that the state's role there is large, the growth, the growth of state ideology, all of this is not in favor, of course, of economic prosperity and growth. This is time-tested. So, of course, therefore, as it were, I would not expect that after resolving the current problems associated with the SMO there, >> Uh-huh. >> with sanctions, that the economy would begin to have, as it were, such a long-term, upward growth. But the fact that there will be an impulse for growth for some time, it will definitely be there. >> And the upward growth, which we also remember with you from previous decades, is it possible in what perspective? Well, so that the stock market recovers, so that investors come back. >> Well, we have experience there for a decade, >> well, one, >> one decade. Well, yes, in case, uh, as it were, policy goes for the benefit, on a favorable path for the economy. Well, that is, uh, the current model of prohibitions, fiscal pressure on the economy, will it somehow What are taxes? We all know, right, that this is a pact, a treaty between those who pay and those who collect. If this treaty is effective, it works, everyone pays, taxes are collected. If the treaty is ineffective, that is, when, say, fiscal bodies act without regard for economic interests, but solely out of considerations and to get some penny, then this pact is violated. And there, it all destroys this normal economic fabric. Someone will start evading taxes, someone will wave their hand at everything they've done. That is, all of this is very bad. There must be a social contract. >> In the first half of 2025, the country owned assets worth over 2 trillion rubles. This is twice as much as in 2024. And even if we don't go into specific examples, right, like reviewing privatization, statute of limitations, or nationalization, why, in your opinion, did this become even more noticeable in 2025 than it was, or is it not so? >> Well, this >> and the figure of 2 trillion says nothing. Well, it's, it's, compared to the assets, of course, which currently, as it were, assess the Russian economy, it's not much, >> but the size of the assets is hundreds of trillions. But as it were, one only has to start. There is such a problem here. So, as it were, before, whoever wanted to engage in de-privatization, in any case, they would face serious legal restrictions, legally, that there are laws, there are rules, there are, uh, statute of limitations, and so on. >> Uh-huh. And now we see that those assets that, well, we won't name them, have been nationalized, they were nationalized in violation of all these old rules. And if the old rules are violated, and there are no new rules, no one has formulated them, then it turns out that, in principle, one can go endlessly or to the end. >> [laughter] >> Well, of course, we understand well that this is not just some kind of arbitrariness of some officials or some people. All cases of de-privatization, they have some real reason. What is it? >> Ah, well, you just need to look at fact by fact. There, for example, they took Strukov's assets. They cite some formal reasons. He was engaged in business while being in power, a representative of power. But in reality, they add that he took so many billions abroad, that he was trying to take all these assets abroad. We stopped this. Another example. Some other enterprise was nationalized because the owners of this enterprise are citizens of other countries. Well, this is Domodedovo, >> well, for example, they are not the only example. They have a foreign passport, besides, besides Russian, that is, dual citizenship. Therefore, they took it. This hints that, uh, guys with dual citizenship should not conduct serious business in Russia. That is, this is a nationalization, uh, uh, not of enterprises, of assets, but it is a nationalization of elites. It doesn't matter, in fact, where you earned it, while in power, you also conducted business or not. But if you don't meet the criteria for nationalization of elites, then they will take yours. That's roughly the logic. It's not written anywhere. >> And what does that give? Just, well, do you have a passport or >> Well, I don't know, this >> I also think that nothing terrible. After all, one must look at whether he observes the laws or not, is effective, is ineffective. Of course, if he is illegally engaged in capital export, well, for example, now there is a limit of 1 million dollars per month, and you are trying to withdraw a billion, then you have fallen under the law, under regulation, then they will deal with you. Well, the passport has nothing to do with it. >> So, do you think that nationalization for the sake of assets, that it will somehow help the budget even more? The reason is not that. >> No. Then they would try to actively sell these assets for good money, but they, as we see, were not, uh, well, partly again, not sold, but distributed. Well, as it were, under the guise of sale, but distributed. >> Uh >> This especially applies to assets of departed foreign companies. They were not sold, they were distributed. >> Yes, yes. Yes. >> And this is also an element of elite nationalization. Regarding investments, since, after all, right, the economy is driven by investments, without them, nowhere, what is the situation now, if there are very few foreign investors, and Russian investors, well, again, speaking about this trend, right, nationalization and de-privatization, who will invest today, how much does it remain a zone of risk, or is the situation with investments more or less normal now in the country. >> No, at the business level, everyone wants to invest. Investments are what, in fact, is part of business. That is, investments in a broad sense, it is the purchase of other businesses, for example, >> well, or investments in production, >> yes, or simply the purchase of machines or some lines that allow you to produce more and maybe better, and so on. >> Everyone wants to invest, >> but there is no money. And even the Ministry of Economy, as far as I remember, I read, they predict a reduction in investments by one percent, or something like that, for the next year. That is, these comrades have calculated quite honestly and did not see the possibility to draw some plus. That is, as it were, the reason is in the structure of the economic, the model of economic policy itself, and not in the fact that business does not want to invest. Everyone wants to invest, everyone wants to earn. >> On a scale of one to ten, how would you, uh, the quantity, so to speak, and quality of investments in the country today, would you rate them? >> Well, it's difficult. I just orient myself by the figures themselves, the size of investments. >> Uh-huh. When after the SMO, the beginning of the SMO, it was necessary to make investments in order to adapt to sanctions, to new conditions of doing business, trade, and investments were made. And therefore, we saw in the statistics that from 2022, 2023, even 2025, we still saw some growth in investments. And there was even almost 8% growth in some year. So. And now it is rightly predicted that there will be a minus, because the economic situation is different, and not because business does not want to work. Regarding the wage race, which, according to the forecasts of the Central Bank analysts, is expected again in 2026. And there, the forecast is, I think, an average wage growth of 2.3%. Well, which is very little. And in Russia, in recent years, people in certain spheres have become accustomed to wage growth. Uh, in your opinion, what is this related to? Is this precisely related to what we started with, that expenses are being reduced and companies will simply not have money to raise salaries for their employees? >> Well, in the model that the monetary and fiscal authorities have built, right, indeed, there is no room for further strong wage growth. >> What did we observe in the previous few years? We gave, right, significant growth. It went into defense industries, very strong growth, but also in areas where there is real demand. The population is concentrated, for example, courier delivery, right, demand is concentrated there, because it is simply convenient. And marketplaces started paying couriers. But in the model of next year, first of all, there is no budget impulse, that is, there is no injection, no monetary injection is expected. Well, according to the model, it's purely market borrowing, >> plus expensive money. That is, you don't have to pay wages, but you have to somehow settle loans. Therefore, even despite the deficit of labor resources that may persist, it should clearly soften, such wage growth will no longer occur. Well, and there are some first swallows in 2025, and even in the current year, there have been reductions in some types of activities. In the IT sector, for example, reductions in large companies, like, say, Russian Railways, but this is a signal, then salaries cannot grow if staff are reduced. This is not optimization, it is simply a reaction to the worsening economic situation, to the deterioration for business. That is why I am ready to agree that in the model that is proposed, right, this forecast may be realistic. >> I cannot help but ask you about the stock market. >> to which you were related. And by 2030, the president has set the task to double the capitalization of the stock market. And to achieve this, it is necessary that IPOs worth 1.3 trillion rubles are conducted in Russia annually. But this year, in 2025, I think there was only one serious large IPO, a company going public, it was Dom.RF. But this figure will not be 1.3. Do you think this is realistic at all? Well. To capitalize the stock market on such scales today or not. >> In the current situation, it is unrealistic. Now the market is structured in such a way that only companies with a sufficiently small business volume can realistically go for an IPO. That is, how much can be raised on the market now >> for an IPO? 2-3 billion rubles. Or you can try to raise much more, say, 10 or 20, but for this, institutional investors must simply, well, agree with the company that is going public on some special terms. And why 2-3? Well, because the market is like that, there is no money on it. Retail investors, institutional investors prevail. And where is the money of institutional investors in the world? Who, who are they? Where do they get their money? These are pension funds, these are insurance companies with their insurance reserves, and these are, Mutual funds, that is, funds that collect money from the population in order to invest in the stock market. This trio plays a decisive role in the market, supplying it with large sums of money. In Russia, the pension system does not provide for pension savings. There are rudiments, there is an idea. The latest is pension savings from the Ministry of Finance, when they are co-financed. But this is all drops in the ocean. Non-state pension funds have long ceased to be replenished with resources, because the model of reforms, it was stopped at some point, I don't remember when, a long time ago. Insurance companies are engaged in investment insurance, that is, short-term money. Life insurance is practiced by literally a few in Russia. This is money for 10-15 years ahead. This is what is in pension funds in the world. And insurance companies, since they do not have long-term money, they naturally, at most, will buy government bonds or a deposit, or put money on deposit. That's all. And there are still mutual funds, or PFs, by Western definition. >> PFs collect money from the population. But these are the same retail investors who, say, said: "I won't go to a PF, I'll buy some shares directly." But this money is not that great. Yes, they say money is lying in deposits and they will go to the stock market. Well, maybe something will go, but generally speaking, people keep money in deposits not in order to switch to the stock market as soon as rates fall. This is money that people need for mortgages, as insurance savings, as money for retirement, and so on. That is, this is not the money that can create an explosion on the stock market, that is, huge money has come. And large checks, they are present on the market now. I mean people who have billions of rubles in personal funds, they naturally do not participate in the market in some way. But again, in Russia, there are not so many rich people with such money. That is, the stock market does not have a serious resource base >> to provide large companies, large ones, well, like Dom.RF, for example, or even larger, with a real IPO, that is, when not 2-3 billion is raised at an IPO, but 50-60 billion rubles at once, 100 billion. How was this possible when there were foreign investors on the Russian market? That is, the same Western pension funds, they were present on the Russian market with a small share, and they provided more than 50% of the stock market turnover. >> Well, from Europe and America, it's clear, but China? >> No, China has its own market. They don't need the Russian market at all to earn money, or what, I don't know. There is no such money on the Russian market. I mean from the investor's side. >> And who is left then? Just private Russian billionaires or institutionally, who else from Russian companies, so to speak? >> Who is investing in the market now, 70% of the turnover is provided by >> retail investors. >> Uh-huh. >> That is, they make a lot of transactions with small amounts of money. 10,000 rubles, then 20,000 rubles. Uh-huh. >> But since all this is spinning, the market looks like it is provided with such turnovers. In addition, there are all sorts of algo-traders who, as it were, are engaged in trying to earn short money through algorithmic trading, and turnovers are large, investments are small. And there are also so-called bigs, that is, big checks, people who rarely, but sometimes come to the market and buy a lot. And their role in turnovers is small, because they buy and hold. Who are they? These are precisely people in Russia who have earned billions of rubles in personal funds. They need to be preserved somehow. If not to invest in new projects, then it is either a deposit, or to work on the stock market. Mostly they buy bonds for now, at least, maybe later they will buy shares, but in principle, this is again not the scale. You said you would return to the question of why the ruble, despite everything we discussed, remains strong. Can you elaborate on this thought, return to it. >> Well, it's not strong, it is what it is. Absolutely elementary macroeconomics. Let's look at the balance of payments. First, the trade balance is 130 billion this year. Plus, then the overall payment balance, taking into account capital outflows abroad. Compared to distant past years, capital outflows abroad are practically non-existent. Where can it be? Uh, so, since Russian capital is not accepted anywhere, especially, well, except perhaps Dubai, and even then, in fact, >> Uh-huh. >> and therefore, as it were, the ruble even weakened periodically because the outflow was so strong that there was nothing to cover it with, now there is no such outflow. Unless, perhaps, exporters leave some revenue abroad, if they have enough rubles, but this system has already balanced, and we see that exporters are bringing in as many rubles as they need, and imports, due to economic slowdown, have stopped growing. That is, there is still a currency inflow, dosed from exporters, and the outflow of currency through imports has stabilized. >> Uh-huh. >> So, the balance is positive. Why should the ruble weaken? For what reason? As it were, it is not weakening for this reason. Although everyone says: "Well, well, soon it will fall." It's not falling. Of course, if a powerful Black Swan flies into exports, and, I don't know, Rosneft and Lukoil cannot export oil at all and lose tens, even more than billions of dollars from exports, then, of course, the situation in the country will change. In the sense that there will be no revenue, and imports will start to put pressure on the balance of payments, and then, accordingly, the ruble will weaken. But this is, as it were, a picture that I don't really believe in, because I think these companies will find a way to export oil anyway. Well, why did companies find others before, and these won't? It's hard to explain. So, do you rule out a serious crisis in the near future? >> Well, that's a matter of terminology. >> What do we call a crisis? >> Yes, of course. Some consider that it is already a crisis. I don't know, it's a matter of taste. I >> But you don't think so? >> No, I don't think so. I think there is a slide. >> There is a threat of sliding into destabilization of state finances and monetary credit policy. Such a threat exists. But if the authorities react adequately to these swans that are flying in, then, in principle, a crisis can be avoided in the sense that it is chaos, as it were, when it is completely unclear what to focus on, it is unclear what to expect from the authorities. It is unclear what tomorrow will bring, and so on. Well, like 2008, the crisis of 2008, right, >> then no one knew what would happen tomorrow. >> If they react adequately, then, uh, such a crisis can be avoided. But, but the price of reacting can be quite expensive for everyone. But I don't mean for ordinary people, but for politicians. >> But is it possible to lift restrictions from the US, from the EU? Well, Russia was offered, from the US exactly. The United States said that if you stop the SMO, then we will lift all our sanctions. The European Union, however, did not join this. It did not make such statements. But I think that the lifting of American sanctions is actually a falling domino. If the Americans start to remove sanctions, then this domino will run through all the others. EU sanctions will become meaningless. >> And do you allow for such a development of events, that they will be canceled? >> I would say that the possibility is open, but the question is who and how will use it. It's not like tomorrow we will wake up and everything will be fine. For this, diplomatic efforts must be made. By both sides, all sides. Well, as it were, it hasn't worked out yet. >> Well, we believe it will work out. We hope. >> We hope. >> Thank you very much. Thank you, Oleg Vyacheslavovich. >> Thank you. [music]