Expert’s commentary: Consequences of the Coronavirus Pandemic for Russia

Boris P. Guseletov, Prof. Dr. Polit. Sc., Senior Research Fellow, the Institute of Europe RAS

 

Economic consequence

In 2020, Russian GDP will shrink by 4.8%. This forecast was published in the International Rating Agency S&P. These estimates of the upcoming economic downturn correspond to the forecast of the Russian Minister of Finance, A. Siluanov.

Despite the dependence of the Russian economy on oil prices, the main contribution to the decline is now the negative effect of the spread of coronavirus and quarantine restrictions. Quarantine restrictions have led to an unprecedented decline in business activity. And even their removal will not necessarily lead to the recovery of demand to pre-crisis levels.

According to the forecast of the Institute of National Economic Forecasting of the Russian Academy of Sciences (INEF), in 2020 Russia’s GDP will decrease by 5.3%, and household consumption will decrease by 6.2%. INEF estimates that the Russian economy will lose at least $60 billion due to lower oil prices. Investment prospects are even worse.

In accordance with the forecast for 2020, the physical volume of investment in fixed assets will decrease by 7.4%, and in the next three years it will increase by 1.2–2.3% per year. As a result, in 2023 investments in fixed assets will be below the level not only of pre-crisis 2013, but also of 2019, the INEF expects says.

For the next few years, the country will fall into an investment pit: investment in fixed assets will not return to the level of not only pre-crisis 2013, but even 2019, according to INEF. Judging by indirect signs, business activity has slowed down significantly even in areas that have not been stopped by the quarantine.

 

Social consequence

The Russian government recorded a rapid increase in the number of officially registered unemployed in May. It is expected that by the end of the year, 2.5 million people will be registered by employment services. In previous years, the total number of unemployed people was 4-5 times higher than the officially registered ones. If this ratio persists, the number of people looking for work may exceed 10 million, which is significantly higher than in the crisis of 1998.

Many analysts say that we should prepare for the next round of weakening of the domestic currency. According to Raiffeisenbank, in the summer months, the exchange rate of the dollar to the ruble can approach the level of 80 rubles.

Against the background of the coronavirus pandemic, the Ministry of economic development of the RF has adjusted its expectations for the dynamics of real disposable incomes of the Russian population in 2020 in the direction of their decline, the main part of which will fall on entrepreneurs. In particular, as stated in the macro-forecast to 2023, presented by the Ministry, it is expected to reduce the real disposable income of the population in 2020 by 3.8%.

 

Political consequence

According to the Director of the Sociological Levada center L. Gudkov, we see a consistent drop in confidence and approval of the President’s activities, an increase in negative assessments of the state Duma’s activities. Ratings are declining, and the core of presidential support is shrinking very noticeably. It was reduced from 59% to 28% by the last measurement. The balance of negative and positive assessments is fairly stable. We can say that mass irritation is rising. But it has not yet resulted in any political actions.