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1 July 2020












Economic Update

The IMF has downgraded its economic forecast for the Russia in 2020. The organization believes that the country's GDP will decrease by 6.6%, against the estimate of 5.5%, which the IMF published in its April forecast. The economic downturn in Russia is due to the coronavirus pandemic, as well as a decrease in expected revenues due to the collapse in oil prices. At the same time, the IMF forecast for 2021 is more favorable than it was in April 2020. The organization believes that GDP will grow by 4.1% (against 3.5% in the April forecast).

According to the Ministry of Economic Development, the Russian economy shrank by 10.9% in May and by 12% in April. For the first quarter the decrease in GDP was 1.6%, with a total decrease of  3.7% for the period of January-May.

The Statistics Service reported a 6.1% unemployment rate in May compared to 5.8% in April, which is the highest level since March 2012 when the unemployment rate reached 6.3%. The number of registered unemployed in May reached 4.5 million people, which is 33% growth in annual terms and an increase of 5.3% compared to April 2020. 

President Putin made a national speech to the nation on June 23, announcing further social support measures for families with children and more incentives for business. The new tax breaks for business include cuts in taxes for IT companies from 20% to one of the lowest rates in the world of 3%. At the same time, President Putin proposed to raise personal income tax for people with annual incomes exceeding $72,825 per year, from 13% to 15%. Only the part that exceeds 5 mln rubles per year will be taxed at the higher rate. It will contribute around ($874.7 mln) to the Russian budget. The move is Russia's first step away from a flat tax system which was introduced in 2001 during Putin's first term as president.  

Update on COVID-19 lockdown easing

Moscow Mayor Sergei Sobyanin announced the 3rd stage of the restrictions imposed due to Covid-19: from June 23, the capital’s travel agencies can resume their work. “Given the gradual opening of the regions and the start of the holiday season, we decided to lift restrictions on travel sector. However, the excursions in Moscow are not be possible yet,” the Mayor said.

Also since June 23, after almost three months break, restaurants and cafes, fitness clubs, swimming pools will open, as well as river cruises along the Moscow River. The restrictions on the operation of libraries and kindergartens have also being lifted. Most institutions and companies have returned to normal work hours.

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