Page 38 - RusRPTApr20

perhaps longer, with the global economy deteriorating to 0%-0.5% year-on- year growth for 2020 overall and "unavoidable" negative growth in 2Q20 and 3Q20. This will be accompanied by the global oil price war, with the average Brent oil price cut to $39 per barrel in 2020.
In the meantime, Russia could paradoxically be insulated from the severe fallout due to a number of factors that are usually sees as structural deficiencies, Tikhomirov suggests.
"In these critical times, we believe that Russia could find itself somewhat better protected – not least due to its archaic system of management, over centralized economy and years of semi-isolation due to sanctions," BCS GM economist writes.
He adds that "over the past 2 decades, Russian authorities have managed to acquire vast experience in anti-crisis management – that includes both fiscal and monetary/currency response."
BCS GM sees inflation rising to 5% due to ruble devaluation, and the economy going into recession of 2.7% y/y in 2020. "The population will face a new period of hardships – and not only health-related – as income falls and domestic demand weakens," BCS warns, seeing real incomes down 3.7% y/y and investment down 3.6% y/y this year.
Fitch Ratings lowered Russia's GDP growth outlook downwards from 2% to 1% in 2020, on a mixture of global risk factors, such as economic slowdown in China, global recession, the collapse of oil prices, and ruble devaluation. The agency sees Russian exports and domestic demand as compromised.
As analysts struggle to catch up with the coronavirus (COVID-19) meltdown and update outlooks, Fitch revision seems already outdated and overly positive. As reported by bne IntelliNews, domestic analysts believe that Russia will not be immune to recession this year, projecting an economic decline in the range of 1%-2.7%.
The Russian Ministry of Energy predicts that oil prices will recover to $40-45/barrel in the second half of 2020 and $45-50/barrel in 2021, deputy minister Pavel Sorokin revealed in an interview with Reuters.
Accounts Chamber head Alexei Kudrin says with oil at $35/barrel and the ruble averaging 72 to the dollar this year, the federal budget will lose approximately RUB3 trillion and run a deficit of just under 2% GDP. The economy will experience nearly zero growth, not the 1.9% growth initially predicted by the economy ministry.
If oil prices average $40/barrel this year, the situation will be slightly better, Kudrin predicts, but GDP growth will still fall far short of initial expectations.
Moody's Investors Service cut the 2020 GDP growth forecast for Russia from previous 1.5% to 0.5%. Should the oil price remain at about $30 per barrel until the end of the year, the decline in growth rate could be more severe, due to low external demand and toughening of the monetary policy as a response to ruble devaluation, the agency argues. For now the agency sees the response package rolled by the government against the coronavirus (COVID-19) pandemic as relatively modest. The need to introduce limitations and lockdowns analogous to Western Europe could lead to much more serious economic consequences. In addition, low oil prices would create credit challenges for Russia given its dependency on oil exports, but the liquidity
38 RUSSIA Country Report April 2020 www.intellinews.com