Page 5 - RusRPTDec20

1.0 ​Executive summary
Brighter days are ahead after a very hard winter​. The appearance of four viable contenders as vaccines against coronavirus (COVID-19) lead to a modest re-rating of the market and drove oil prices up to close to $50 briefly which will make life easier for Russia, but the second wave sweeping the country in November means the next few months of waiting for the vaccine will be very tough.
By the end of November the market took a pause, but the rally and rising confidence is expected to continue in the new year as the vaccines are rolled out – the first mass distribution to health workers and OAPs is expected t begin in Russia in December – the pandemic should begin to fade, releasing a year’s worth of pent up demand.
The economy was already recovering well before the vaccine news. GDP fell 3.6% y/y in 3Q20, in line with the 3.4% drop in basic sector output during the quarter. This marked a significant improvement on 2Q20, when GDP sank 8%. After seasonal adjustments, the economy enjoyed a strong q/q bounce in 3Q20 that was even stronger than had been expected. Given this, analysts say the full year contraction could be less than the -4.5% prediction. Russia should return to growth although the forecasts are currently fro 2.8% by the IMF, which is a conservative estimate.
In general the Russian economy has fared far better during the crisis and is recovering faster than most of the other countries in Europe. Economists are still trying to unpack this story but one of the factors playing to Russia’s advantage is its massive reserves and very low external debt: gross international reserves (GIR) are just under $600bn with some $172bn in the National Welfare Fund (NWF); external debt is just under 15% of GDP, but net external debt, if you take the reserves into account, is zero.
Russia could pay off all its external and public debt tomorrow and still have $100bn left over which would be enough reserves to ensure the stability of the ruble. It is in an extremely strong macro fundamental position.
Another factor contributing to the economy’s resilience is the fact that services are not particularly well developed. While this is changing fast as the e-commerce sector is booming at the moment, services remain relatively underdeveloped, which have been particularly prone to the coronavirus.
Other factors like low personal indebtedness and the extremely conservative policies purposed by the Central Bank of Russia (CBR) have also helped. The robustness of the Russian economy has allowed the government to keep
5 ​RUSSIA Country Report​ December 2020 ​ ​www.intellinews.com