Red Square in Moscow on May 21, 2020. – Stanislav Krasilnikov / TASS / Sipa
Like most countries in the world, the coronavirus is bringing the Russian economy to its knees. Authorities in the country said on Thursday they expected a 9.5% plunge in the gross domestic product (GDP) in the second quarter and an overall decline of 5% in 2020.
All indicators are red
According to the Minister of Economy, Maxime Rechetnikov, the Russian economy should recover in 2021 with an expected increase of 2.8% of GDP and return to its pre-crisis level in 2022. But for now, the country has to deal with the health crisis and the fall in oil prices. The Minister of Economy has said that he expects unemployment to rise by 5.7% in 2020 and a fall in exports (-36%) and imports (-21.3%). Investments are also expected to drop 12% this year.
Rosstat, the statistical agency, has already reported on Thursday that Russia’s industrial production fell by 6.6% in April over a year because of a completely unemployed month decreed by President Vladimir Putin. Most industries did not return to work until May. From the start of the containment, the blow was hard for Russian companies, forced to maintain wages, a mission impossible especially for SMEs.
Russia better prepared than in 2014
The Russian Central Bank has also predicted a dark year for the country. According to her, Russia should expect a drop in GDP of up to 6% in 2020 and a number of unemployed totaling 8 million people. But, like the government, it also plans to resume growth in 2021.
It should be noted, however, that Russia this time seems better armed than during the last crisis started in 2014 with the imposition of Western sanctions. Moscow, which has since accumulated large reserves through five years of budget austerity, has made itself less vulnerable to external shocks by substituting part of its imports and containing inflation. Russia has also taken multiple measures to support citizens and businesses, but these may prove insufficient, according to economists.
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