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Economic Update

The Russian economy has been rocked by the coronavirus outbreak and the breakdown of the OPEC+ oil production pact between Russia and Saudi Arabia. The turmoil has shocked traders around the world and resulted in sharp volatility on the Russian stock markets and swings in the value of ruble, both of which were down around 20% since the start of the year. However, on April 7 ruble managed to gain back some of its value and is currently trading at 73.32 Roubles against the U.S. dollar compared to its bottom value of 80.88 on March 24. Over the weekend of April 11-12, a new deal was reached and oil production which will limit the production capacity of both countries, which should help to stabilize the price of oil. However, traders do not seem to be believe in the deal much and the price of oil has not increased substantially in the short-term. This is due to the large reduction in demand for energy because of the ongoing lock downs in much of Europe and the world, caused by COVID-19.

It is expected that after the pandemic is over, Russia will recover faster than Western Europe and the USA as it is not so dependent on the service industry, nor is it part of any sophisticated supply chains in manufacturing, most of its exports are raw materials.

It is believed that rouble will also recover some of its value by Q4 when demand for oil increases, as China gets back to full production. Besides, Russia is no longer so dependent on food imports as previously, therefore inflation will not increase so much and food prices will not increase significantly, meaning that people’s disposable income will not be so affected as in the past.

So, the forecast for Q4 is positive and Russia’s economy will apparently recover much quicker.

Self-isolation in Russia

On March 25, the President Vladimir Putin made an address to the nation regarding the COVID-19 situation and announced a wide range of measures aimed at preventing the spread of coronavirus and supporting small and medium-sized enterprises, including support of those who have lost their jobs by paying them a minimum wage until the end of the year. SMEs will receive a six-month tax deferral and it expected that the contributions of employer to social security payments will also be halved, to try to reduce the cost of employment.

The week of March 28 - April 5 was declared a week-long paid period of work. This period has since been extended until the end of April.  During this time, only key businesses like banks, pharmacies and supermarkets can stay open, most companies continue to work at a distance, but not all businesses are able to do this. Moscow residents were ordered to self-isolate at home.

Update on COVID-19 in Russia (as of April 14)

Since the novel coronavirus was first detected in Russia, it has spread to 21,102 people. Although the death rate and total infection rates are very low compared to most European countries, the Moscow Mayor Sergei Sobyanin said the risk of the coronavirus spreading is seen as high risk and Moscow specifically (60% of cases), has seen increasingly strict measures imposed, to try to limit the burden on the medical system. It is assumed that Russia has not yet reached the peak of the infections.  

President Putin has been very careful to out-source the decision for each region of Russia to the regional governor, due to the huge size and different impact of the infection on different areas of Russia.

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