Page 6 - RusRPTDec20

stimulus spending to a minimum. While the official version is Russia has spent 9% of GDP on fighting the economic effects of the virus, former Finance Minister and Audit Chamber head Alexei Kudrin says much of this spending was already in the budget and has merely been re-assigned to things like the social sphere. He estimates the true new stimulus spending at closer to 3% -- one of the lowest levels in the world. However, this has proven to be sufficient so far.
2021 could surprise on the upside with a relief boom as several economic planets align.
The base case assumption amongst Russia-based economists is the launch of mass vaccination against COVID-19 sometime in 2Q21-3Q21 and a ‘victory’ over the pandemic in late 2021 or early 2022. In the short-term, the epidemiological situation will likely remain rather complicated, but infection rates should slow significantly in Russia, Europe and the US with the approach of spring and summer,
That could lead to a turning point in around March-April 2021 when a reversal in the base factor and the approach of spring should bring Russia’s – and the world’s – GDP growth rate back to black. These positive changes should be supported by the mass vaccination of the global population from mid-2021.
Russia’s economy should get a double boost from rising levels of domestic activity in the services, trade and investment areas, as well as from positive shifts in external factors (higher global demand will support commodity prices and should trigger more activity from Russian exporters).
All this coupled with the de facto stimulus effects of the national project spending and its feed through into rising real incomes that will drive consumption should all lead to a boost in economic growth. To an extent the virtuous circle of growth-profit-investment-wage hikes-spending that drove the boom in the noughties could reappear in some form.
Still, Russia has to get through the holiday season first with soaring infection rates that topped 25,000 per day at the end of November – twice the level in the first wave – and a public health system that is under extreme pressure. Nevertheless the Kremlin has already chosen not to lock the economy down, judging the economic damage that would do is worse than the loss of life the epidemic will cause.
Politically the Kremlin was getting ready for some hard work in 2021. ​The government was reshuffled and the last of Dmitry Medvedev appointments were swept away as Prime Minister Mikhail Mishustin appointed his own people. In addition three new ministerial posts were created to better manage the spending of budget funds. All the new appointees are technocrats and this is a repair crew that is being brought in to fix Russia Inc.
6 ​RUSSIA Country Report​ December 2020 ​ ​www.intellinews.com