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8 September 2020

Economic Update

The Russian government expects the coronavirus to inflict significantly less damage on the country’s economy than it first feared. The Economy Ministry is now predicting GDP will fall by 3.9% in 2020, up from its previous forecast of a 5% contraction. Russia’s economy has not taken as big a hit from the pandemic as other European economies, recording a contraction of 8.5% in the second quarter of the year, according to official statistics. That compares to a fall of more than 20% in the U.K, and double-digit declines in all of Europe’s major economies. Economic activity has bounced back strongly from record lows, and is now at around 95% of pre-coronavirus levels, Oxford Economics estimates. Despite a string of upgrades from both official and independent forecasters, there is still a high degree of uncertainty over where the Russian economy will head over the next few months.

According to Sberbank research, the recovery of consumer demand in Russia is "fading" fast.  In July 20-26th, there was a slight increase in consumer spend of 0.6% year-on-year. However, Sberbank consumer activity index, which reflects the variety of purchased goods and services, fell from 77.1 to 74.7 points. Despite the easing of restrictions, 7.5% of service sector entities and 3.8% of non-food stores have not opened yet. At the same time, consumers are more cautious about spending their money than they did before the pandemic. For example, in July, there was a 28% decrease in spend in cafes and restaurants and 22% reduction in spend in beauty salons and spa centers compared to a year ago.

Just one third of Russian companies had a financial ‘safety cushion’ by the start of the COVID-19 pandemic, according to the poll performed by NAFI Analytical Center in August. According to the research, the majority of entrepreneurs (62%) had no savings by the pandemic start. Each third representative of the business (32%) informed that his or her company had certain savings and financial reserves. The majority of business representatives (81%), whose companies had reserves by the start of the pandemic, believe their amount is insufficient to tackle pandemic-related challenges.

The majority of businessmen (79%) reported the decline in the demand for their goods and services during the pandemic periods. Entrepreneurs working in the trade sector (88%) more frequently informed about the shrinking demand. 20% of polled persons said the demand during the pandemic period has not actually changed.

About 40% of restaurants and cafés in Russia were not able to open after the lockdown, according to Russia’s association of restaurants and hotels. By the end of the year, about 70% of restaurants could go out of business.

Russia plans to resume Egypt, UAE, Maldives flights

Russia has added Egypt (Cairo), the United Arab Emirates (Dubai) and the Maldives (Velana airport) to the list of countries it plans to open flight corridors with. The decree, signed by Prime Minister states that air travel will resume “on a reciprocal basis.” It means that the three countries will need to accept Russian citizens in order for Russia to accept their citizens.

Russia also resumed flights to Switzerland on August 15th. Flights from Moscow to Geneva are operated once a week and available only for the Russians traveling for medical purpose or those with a Swiss residence permit. The Government reported that the frequency of air traffic with Switzerland will be increased from one to four flights per week: two Aeroflot flights on Moscow - Geneva - Moscow route and two Swiss Air flights on Zurich - Moscow - Zurich route.

On August 1st Russia already opened the first international flights to Turkey (Ankara and Istanbul), the United Kingdom, and Tanzania. Starting from August 10th, Russia resumed international flights to Turkish resorts - Antalya, Bodrum and Dalaman.

This week, both Greece and Poland lifted their coronavirus travel restrictions to allow Russian citizens to cross their borders for two-week periods.

International flight now operated from six regional cities

On August 20th, three more Russian regional cities were added to the list of departure hubs. Now apart from Moscow, St. Petersburg, and Rostov-on-Don, international flights operate from Kazan, Kaliningrad, and Novosibirsk.

Novosibirsk is the fourth city after Moscow, St. Petersburg, and Rostov-on-Don to operate regular flights to Antalya (Turkey). S7 Airlines also announced the start of direct flights from Novosibirsk to Antalya on September 5. Flights will operate up to four times a week. AZUR air announced the launch of charter flights to Antalya from Kazan and Novosibirsk.

Montenegro, Poland, and Greece open borders for Russian tourists

Montenegro has included Russia in the list of "green countries". Azerbaijan is also on the list of the countries. However, according to the Russian Ministry of Foreign Affairs, it will take some time before the borders with other countries are opened.

This week Greece and Poland also lifted their coronavirus travel restrictions to allow Russian citizens to cross their borders for two-week period. However, travelling to these countries has not been allowed from the Russian side.

Many tourists are planning to travel in the autumn

A survey by the online travel agency OneTwoTrip about their client’s travel habits this summer reported the following information. It turned out that 74% had not yet been on vacation. 50% have already planned a vacation for the near future, but the rest are not planning to go on vacation yet. 73% of the respondents put high hopes for travel in the autumn and have already booked fights. For trips in September-October, they mainly choose domestic destinations: Moscow, Sochi, St. Petersburg, Crimea, Krasnodar, etc. Once the borders open, 55% are ready to take an additional holiday abroad. The most frequently searched international flights for the autumn are to Turkey, Montenegro, Italy, Uzbekistan, the USA, Spain, Thailand, Great Britain, France, and Germany.

Russians plan to go on vacation this year but spend less money

The online travel agency OneTwoTrip found that the coronavirus has impacted the holiday plans of the Russians. 31% of respondents noted that it is difficult to plan their vacation, as their preferred destinations are still closed. 28% are afraid that the flights or trains will be cancelled, and 17% worry about the cancellation of hotel booking. 21% of Russians stated that they are ready to plan their vacation now.

Many travellers cannot afford holidays due to the coronavirus crisis. 61% consider that quarantine and a period of self-isolation has had a negative impact on their financial situation. 39% of them reported that it worsened slightly, and 22% noted that their financial situation has worsened significantly. For 30% of respondents nothing has changed, and 10% even managed to make some savings.

44% of respondents managed to go on vacation this year, the rest spent the summer at home or at their countryside dacha. At the same time, 49% plan to go on a trip in the autumn or winter, and 21% plan for next year. 24.4% have not yet decided on their vacation plans, and 5% are sure that they will not travel at all.

Most of the respondents who still plan to travel this year will choose destinations in Russia (51%). 30.6% would like to go abroad, and 18% have not yet decided. At the same time, 62% reported that they will economize on travel. 44% will economize on transportation and will look for cheaper options. 32.4% said they would have to economize on everything.

Most of those who plan to go on vacation will fly to their destination (66%). The second most popular option was by train (10%).

According to the poll conducted on online booking platform, 39% of respondents still would like to go to the seaside.










Russians started to plan travel for New Year holidays

In July-August, Russian travelers started to book tickets for the New Year holidays after a long break. According to the travel booking platform, 25% of travelers plan to travel abroad, 75% plan to go on holiday in Russia. Among the most frequently booked foreign destinations are Rome, Athens, Yerevan, Lisbon, Bangkok, Dubai, Innsbruck, and Prague. It is worth noting that about half of the tickets to foreign destinations for the New Year period was booked before COVID-19 pandemic, in January-February 2020.


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