Latest Market Insight

17 June 2020












Economic Update

The Russian economy is set to emerge from the coronavirus crisis on the same slow but steady trajectory it had before. The process of recovery will be gradual and not V-shaped, as reported by the Head of Research and Forecasting at Russia’s Central Bank.

The value of the ruble has fallen by 10% since the start of the year, despite oil prices having fallen by more than a third and Russia having cut back significantly on total oil production as part of a renewed OPEC+ deal brokered with Saudi Arabia. Russia’s overall international reserves, which make up 25% of the National Welfare Fund, have even increased so far this year. They now stand at $566 billion, pushed higher by rising gold prices despite offloading to patch the hole in the government’s budget created by lower oil prices.

The World Bank predicts Russia’s GDP will drop 6% this year, compared to a global average of 5.2%. Forecasts for Russia’s unofficial unemployment rate go as high as 20 million, and households could see their income fall as much as 20% over the second quarter. At the same time, figures on railway cargo, electricity consumption and industrial production point to a “less costly” Russian quarantine than that experienced in many other parts of the world. The dichotomy is the concern over job losses and wage cuts, while industry and manufacturing has beaten expectations and indicates that Russia’s economic recovery will be uneven, potentially accentuating underlying weaknesses.

Inflation was 3% last month and the Central Bank of Russia has said that there is further room for monetary easing, but still allow them to keep the rate of inflation near to its 4% target.

Experts have noticed a decrease in the level of anxiety among Russian consumers: it is still high, but it is slowly decreasing as noted in the results of the BCG study. Compared to April, the number of respondents who think that the worst is yet to come has reduced by 18%: in April this was 65%, in May, it lowered to 47%. The opinion that the world is in a danger was shared by 75% of the survey participants in April, and in May this share fell to 62%.

Moscow authorities are hoping that by July, Moscow’s economy will have returned to the same level as prior to the introduction of the lock-down for the coronavirus.

Update on COVID-19 lockdown easing

On June 8, Russia announced it would lift a range of anti-coronavirus measures including the strict lockdown imposed in Moscow. On June 9, the capital's general lockdown and strict electronic pass-system required for anyone wishing to mover around the city ended. This means Moscow residents are now travel freely for the first time since late March. Some measures have already been gradually lifted over the last few weeks, including the opening of non-food shops, as well as the reopening of hairdressers, beauty salons and veterinary services.

Starting from June 15th, libraries, real estate offices and service companies can resume work, whilst restaurants and cafes will open in two stages beginning June 16 with Moscow residents allowed to visit outdoor cafes initially.

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