Latest Market Insight

20 May 2020












Economic Update

In its first official forecast for Russia's GDP in 2020, Central Bank predicted the economy to collapse by 4-6%.The recovery growth of the Russian economy is forecasted at 2.8-4.8% in 2021 and 1.5-3.5% in 2022. In the basic forecast, Central Bank expects the main decline to come in the second quarter: GDP may drop by 8%. The economic recovery will be smooth, and even the growth in the third and fourth quarters might not help to overcome the fall of the second quarter. According to Central Bank, as a result of one-month self-isolation, Russia's GDP may lose from 1.5% to 2%. The service sector suffered from restrictions most of all, while delivery services and e-commerce are in a much better position.

The largest contribution to the decline in GDP in 2020 will be made by a fall in exports from 10% to 15%. The annual inflation will reach 3.8-4.8% at the end of 2020 and will stabilize at 4% in 2021 and 2022. Inflation dynamics will be shaped under the influence of a significant decline in domestic and foreign demand. The balance of payments deficit is expected to reach $35 billion in 2020 and $20 billion in 2021 and to return to a surplus of $5 billion in 2022. Negative balance of payments in Russia is projected for the first time since 1997.

According to Vice-Prime Minister, the rate of unemployment reached 1.4 million, double the rate that existed before which was 726 thousand. However, the Federal Agency for Tourism reported that due to the pandemic and self-isolation 7 million employees in the Russian tourism and hospitality related industries are out of work. The tourism industry provides at least 2.5 million jobs directly with 1.6 million people work in the hospitality industry, and in the high summer season, the number of jobs traditionally increases by 1.5-2 times.

Lockdown easing and new support measures

Russia's coronavirus control measures have been eased starting from May 12th when the national six-week "non-working regime" was ended. However, the regional authorities are allowed to decide whether their region is ready for the lock down to be lifted and both Moscow and St Petersburg have chosen to extend the self-isolation measures until the end of May, with the exception of construction and manufacturing sectors that allowed back to work from May 12th.

The President has announced additional economic support measures, including bonuses for doctors, subsidies for companies who retain their employees and benefits for self-employed. There are also payouts for families with young children. The key economic support for businesses are:

1)    A loan programme for enterprises to help support employment in sectors that have been most affected by coronavirus. The loan will be calculated at a preferential rate of 2% and is valued of a minimum wage (154 Euro) for a six-month period for each employee retained. If the employer retains 90% of their employees for six months, the cost of the loan will be covered by the state. If 80% of jobs are retained, the state will cover 50% of the loan and interest on it. It is expected that this measure has the potential to sustain 7 million jobs.

2)    Cancellation of tax and social insurance contribution payments for the second quarter of 2020, except for VAT, for private entrepreneurs, small and medium-sized businesses.

The government is also preparing an Action Plan for Economic Recovery and Growth of Russia by June 1 to help restore the economy and the level of employment.

Update on COVID-19 in Russia

Russia confirmed 9,263 new coronavirus infections on May 19, 2020, bringing the country’s official number of cases to 299,941 with 50% of the cases detected in Moscow. Russia managed to stop the growth in the number of new cases of coronavirus infection and stabilise the situation. 27 of Russia's 85 regions are ready to start gradually easing coronavirus restrictions. For the last four days in a row, less than 10 thousand cases were recorded per day. Russia's low coronavirus death toll compared to other countries is a result of the population's herd immunity, according to Russia's Research Center for Epidemiology.  











On 8 May 2020, Rospotrebnadzor (Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing)published guidelines for the gradual lifting of restrictions imposed due to the COVID-19 pandemic. The exact timing is not specified as each region is authorised to coordinate restriction measures and lockdown easing at the regional level considering the local epidemiological situation. The plan includes three phases starting from allowing walks and outdoor sports, opening small non-food stores and companies directly working with consumers. At the next stage, large enterprises and some educational institutions will open.  The final stage will allow to open all trade and service business.

Ukraine eases lockdown

Ukraine's government has extended its nationwide lockdown until 22 May but agreed to partially lift some restrictions from 11 May. The partial lifting of the restrictions includes opening parks and recreation areas, and allowing some shops, such as those specialising in household goods or textiles, to open. Cafes can reopen for takeaway services.

Research on public mood in Russia

According to the survey of the Centre of Strategic Research (CSR) conducted in May, every second person has experienced a fall in their household income due to the coronavirus and the quarantine restrictions. Most Russians (58%) report a decrease in their household income, 5% lost most of their main source of income.













Changes in household income of Russian families in May

52% had a salary reduction, 25% were sent on unpaid leave, 23% lost their jobs. CSR predicts that the rate of unemployment will reach 17% in the short-term and up to 12% by the end of 2020, which three or four times higher than in 2019 when the unemployment rate was 4.6%.

20% of families do not have savings and 22% have only one month of savings. On average, Russians only have savings for the period four months. 48% said that they had made cuts to their spending and 45% of respondents cancelled a trip. 32% of Russians plans to travel around Russia while 13% planning to travel abroad. The volume of domestic tourism in Russia is expected to reach 13.6 billion USD. On average, Russians are willing to spend no more than 315 USD per person on domestic holiday.


Ђ Back to journal