Page 4 - RusRPTSept20

1.0 Executive summary
The corona pandemic hit the Russian economy hard in the spring, but unevenly. However, even in most of the worst affected industries, the deepest drop seems to have already passed and in recent months production has risen from the spring pit.
The revised fiscal outlook prepared by Russia's Ministry of Economic Development for September might include a notable upwards revision of GDP forecasts from previous 5% recession to 3.9% recession expected in 2020, Kommersant daily reports on August 31 citing unnamed sources. The ministry is encouraged by the faster-than-expected recovery of domestic demand in summer 2020, as well as other economic indicators in 2Q20.
As a result, investment is also expected to shrink only by 6.6% in 2020 versus previous 12% decline expectations. The ministry also reportedly expects the GDP to recover to pre-crisis levels by 3Q21.
Compared to a year earlier, however, almost all industries were still in deficit even in July. But at the same time all but one sector reported month-on-month improvements. The only laggard remains oil and gas where output was down 8%.
Agriculture continues to be the sector least affected by the crises and gains in agricultural output accelerated to 4% y/y in July from 3% y/y in June.
Overall the economy is still suffering, but it does appear to have turned the corner. Industrial output declined by 8% y/y in July 2020, improving from the 9.4% y/y decline seen in June, and growing by 3.4% in month-on-month terms, according to Rosstat.
According to the Russian Ministry of Economy's forecast, GDP contracted by almost 5% in July and by about 4% year-on-year in January-July. It was down by 8.5% quarter on quarter too, but this was mildest contract when compared the other big crises in 1998 and 2008. Russia’s economy has weathered this story better than the big storms in the past.
Consumer-driven service sectors contracted sharply in the spring, but retail trade in particular has recovered rapidly in recent months once the lockdown was lifted.
While industrial production has fully recovered in some of Russia’s regions, retail contracted in every single region bar one: Chukotka, the former home of oligarch Roman Abramovich. But the contraction was mild: in July, retail sales contracted by only 2% year-on-year.
The economy is coming out the other side and Russians started making some of the big ticket purchases they had put off in the crisis months. Trade in new cars has grown so rapidly that it reached pre-crisis levels in July.
The recovery in other services has been clearly more moderate, with production still 25% lower in July than a year earlier. The recovery in consumer-led sectors has been supported by relatively favourable wage developments, as average wages did not decline much in April-June, even if unemployment has risen sharply to 6.3% in July from the mid 4s earlier in the
4 RUSSIA Country Report September 2020 www.intellinews.com