The Russian economy was predicted to recover only by 2023
With the development of the COVID-19 coronavirus pandemic in Russia and the tightening of restrictions in Moscow and other regions, accompanied with the fall of oil prices, the experts are making increasingly gloomy forecasts about the future of the Russian economy.
It’s predicted a serious collapse and a long and bitter recovery for the economy.
What is happening with the Russian economy in recent months is compared with a triple blow. Prices for Russian Urals oil cannot rise above $ 20 per barrel, oil and gas budget revenues are sharply reduced. Antiviral measures caused a mass quarantine of enterprises, and unlike the leading countries of Europe and the USA, the government did not provide much support to either citizens or business.
"If the development of the epidemic cannot be quickly controlled and the state does not come to the aid of consumers, Russia’s GDP may decline by 10.2% by the end of the year," McKinsey & Co., a consulting company, predicts. The economic pit will outperform the 1998 default in depth. (-5.3%), and the global financial crisis 2008-09 (-7.8%), " finanz.ru notes .
According to forecasts of bankers from Alfa Bank, Raiffeisenbank, ING and Citi, the non-working regime for a significant part of citizens in April will bring down the economy by 20-45%. Therefore, even in the best case scenario, according to the results of the quarter, the economy will fall by 18%, and the Russians will lose 17.5% of real disposable income, ” say experts at the Vnesheconombank Research Institute (VEB) .
In their opinion, by the end of the year Russia will come out with a GDP that has decreased by 3.8%. The real disposable income of Russians may decline by the end of the year by 6.5%, which will be a record decline since 2014. The unemployment rate in 2020 risks jumping to 7% after 4.7% in 2019. According to the head of the Accounts Chamber Alexei Kudrin , the number of unemployed in Russia will temporarily increase even more than three times - from 2.5 to 8 million people. Citizens of six days in a row have to go through another shocking collapse in living standards; they, like business, will need help. McKinsey predicts that GDP will return to pre-crisis levels only in 2023.
“If our economy does not restart, if our companies decrease, as a result, in two months the debts of companies that are unable to continue working will spread to banks,” said Alexei Kudrin, another side of the threat to the economy. As a result, assistance in three to six months may already be required by banks, because lending to the population in recent years has been hardly the only growing business of bankers. Now, having given individuals seven trillion rubles of new loans in three years, banks will face a five to seven-fold delay in growth, McKinsey predicts. In monetary terms, this is 4-4.8 trillion rubles unpaid during payments.
The threat of defaults on loans to retailers, service companies, commercial real estate, tourism and air transportation, as well as the outflow of deposits, to prevent which the rates may need to be raised by 2-5%, is quite real.
A short-lived but destructive price war with Saudi Arabia, in which Russia is defeated, threatens to throw the country back into the past and even for decades. The reduction in oil production, which Russia agreed to under the new OPEC + deal, "could be the most serious economic disaster since the collapse of the USSR," said Kirill Tremasov, head of the analytical department at the Loko-Invest investment company. Already by June, oil production may fall from 11.2 to 8.5 million barrels per day, the lowest since 2002. The very technology of oil production in Russia, unlike Saudi Arabia, is designed in such a way that shutting down a well for several months can lead to its loss forever.
And after the collapse, the oil refining industry will inevitably be expected, with job cuts and a sharp drop in investment, service companies, metallurgists and manufacturers of pipes, building materials, and special equipment. The decline in production will affect the gas, coal, and other raw materials industries.
Only the direct effect of the decline in oil and gas production means a 5% reduction in industrial production in 2020 and a 1.2% GDP decrease, and taking into account secondary effects, these figures can be safely doubled. Analysts at Nordea Bank believe that Russia will lose up to 10% of export foreign exchange earnings, imports will decrease by 25%, primarily imports of consumer goods and technologies.