Page 8 - RusRPTMay20

2.0​ ​Politics
2.1 ​ ​How bad will it get?
The Center for Macroeconomic Analysis and Short-Range Forecasting (TsMAKP) has published a “constructive” version of the forecast for the Russian economy, or an optimistic scenario from TsMAKP. the probability of, which it is estimated at 55–57%, with an active state response to the crisis. The fall in real GDP in this optimistic will be able to be kept at 2.3–2.5% in 2020 and 0.5–0.8% in 2021. In two years the economy will decline by 2.8–3.3%. After the crisis in 2022, the economy will return to growth, but very slow: 0.6–1%.
This means that the goal of President Vladimir Putin to bring the Russian economy to a growth path above 3% will be delayed for at least two years. And if you recall that at the end of 2017, the authorities set a goal to achieve growth of 3.1% in 2020, then at least three years. The economic recovery after a severe recession will actually continue almost until the next presidential election of 2024.
But without active incentives from the state, the recession may turn out to be even deeper. If the situation develops according to a “tough” scenario, which assumes only a stabilizing policy of the authorities, GDP in 2020 may fall by 3–3.3%, in 2021 - by 0.8–1%. Thus, the gain in the “constructive” version relative to the “hard” one will be about 1 pp GDP dynamics in 2020–2021.
In any scenario, it will be difficult to avoid a jump in poverty or unemployment. For Russia, this crisis may turn out to be much more serious than for the world as a whole, since the quarantine shock with stopping entire business sectors in large cities is superimposed by a drop in oil prices and oil revenues against the background of an exhausted economic model strongly tied to the oil factor and is no longer capable of intensive growth. ” The decline in oil prices will lead to the fact that a significant part of enterprises quitting quarantine enterprises “simply cannot fully re-open,” warns TsMAKP.
The centre’s report was prepared before statements by US President Donald Trump and President Putin’s confirmation that global oil producers, including Russia and Saudi Arabia, could agree to cut total production by at least 10mn barrels. per day (from the current level of 100mn). Although these statements have caused a rebound in oil futures of up to $35 per barrel, there is no guarantee of future agreements: Putin insists that the United States should share the burden of cuts, and the US refuses to discuss it. In addition, overstocking the oil market is not the only problem: at the same time as supply increases, global demand sharply decreases due to the pandemic and the shutdown of transport and many enterprises.
TsMAKP already puts relatively high oil prices in its “hard” scenario: $37–40 per barrel of Urals on average in 2020 (last week, Urals quotes fell to $11–13, the lows since 1999). Therefore, even taking into account a possible deal by world producers to reduce oil supplies, potentially increased prices may not exceed the scenario conditions of TsMAKP. At the same time, the production and export of Russian hydrocarbons will decrease, which will limit the gain from rising prices.
The scenario that potentially limits the depth of the economic downturn in Russia will require a large-scale anti-crisis program from the Russian state, which the authorities are not yet ready for. According to the centre, budget incentives should be at least RUB2.6 trillion only in 2020 (about 2.4% of GDP in 2019) to provide fiscal stimulus (primarily in terms of social initiatives already
8​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com