Vladimir Putin will cut imports for Russians

The head of the Russian Federation demanded that the share of imports in the economy be reduced to the level of the late Soviet Union - 17%. The government does not have enough currency, which is used to finance the war with Ukraine.
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The imported abundance in which Russia lived for decades, purchasing consumer goods and technology abroad, no longer fits into the Kremlin’s economic plans.

In the next 6 years, the share of imports in the Russian economy should drop to the minimum in the entire modern history of the country - 17% of GDP. Vladimir Putin gave this instruction to the government following his address to the Federal Assembly, in which he announced a package of promises to citizens for a fifth presidential term.

According to materials on the Kremlin website, by 2030, Putin demands to bring Russia to 4th place in the world in terms of economic size (in terms of purchasing power parity), increase sales abroad of anything other than the simplest mineral raw materials by two-thirds, and reduce the poverty level to 7% , learn to independently produce high-tech goods and raise the birth rate to stop the natural population decline, as a result of which the country has lost 11 million people since 2000.

A sharp reduction in imports among Putin’s economic plans is an “ambitious” task, notes Astra FM Investment Director Dmitry Polevoy: over the past 14 years, this figure has remained stable - about 20-21% of GDP. And even after the invasion of Ukraine, after a short-term drawdown last year, it recovered to 19-20%.

Imports of 17% of GDP are the level of the last years of the Soviet Union, according to World Bank data. Thus, in 1990 this figure was 17.9%, and in 1991 it fell to 13% amid the currency crisis that hit the decrepit Soviet economy.

The share of imports in Russia reached a record 48.2% of GDP in 1992, when the government of Yegor Gaidar opened borders to trade in order to stock store shelves and avoid mass starvation. In the second half of the 1990s, the volume of imports in relation to GDP decreased to 24-26%, and in the first half of the 2000s - to 21-22%, according to World Bank statistics.

Reducing imports to 17% of GDP will require abandoning a significant part of imported goods and services, Polevoy points out: this will require reformatting production chains and final output.

So far, import substitution has been successful in agricultural products and food, but with goods with high added value there has been much less success, Polevoy states. Last year, according to the Central Bank of the Russian Federation, goods worth $303 billion were imported into Russia, which is close to record highs before the annexation of Crimea ($318-341 billion in 2011-13). Purchases abroad of machinery and equipment increased by 24%, and clothing and footwear by 21%.

The disappearance of imports will bring the Russian economy even closer to the Soviet one. This process is already underway, says Sergei Guriev, dean of London Business School. The Russian Federation has become more and more reminiscent of the USSR in recent years, he says: then industry was supported by injections from the budget, and when those stopped, it fell into a spiral of deep recession.