Russia’s Economic Woes Continue to Mount During Coronavirus Outbreak

As the Kremlin resists pressure to spend, official statistics show economic activity down by a third and tax revenues crashing.

By Jake Cordell2 hours ago

Around 2,000 businesses are applying for interest-free salary loans every day, the government said.Kirill Kukhmar / TASS

A third of the Russian economy has ground to a halt because of the coronavirus lockdown, the Russian government said Wednesday, as authorities continued to resist calls for bolder measures to support the economy, and unveiled a three-step plan to start easing virus restrictions.

In a televised meeting of the Russian cabinet, ministers told President Vladimir Putin that Russia’s economic activity has fallen by 33% since the beginning of the coronavirus pandemic. NEWSRussia Moves to Gradually Relax Coronavirus Lockdown: OfficialsREAD MORE

Putin instated a “non-working” period at the end of March which is scheduled to run until May 11. In Moscow, and many other regions, strict stay-at-home orders have also been in place for the last six weeks, although outside Moscow enforcement has been patchy and mobility has remained relatively high.

Finance Minister Anton Siluanov told Russian business daily Vedomosti on Wednesday that the government needed to take a cautious approach to spending throughout the crisis, saying it would be wrong to waste Russia’s $157 billion national wealth fund, accumulated from years of profits on oil exports, over the next two years.

No further significant measures to support the economy or businesses were unveiled at the latest televised meeting of Russia’s leadership Wednesday afternoon, despite Andrei Belousov — who took over as Russia’s acting prime minister after Mikhail Mishustin contracted Covid-19 — saying that the country is now entering a difficult period for the economy.

The coronavirus crisis has rocked Russia’s stability-first economic model, which was set up to cope with a drop in oil prices, analysts say, but not a drop in oil prices at the same time as the crash in global and domestic spending that the coronavirus has triggered. 

Those dynamics have heaped pressure on Russia’s apparent financial strength as the economic costs of the coronavirus continue to mount — for the government, businesses and households. 

Every extra week of restrictions costs the Russian economy 1% of its annual GDP, Oxford Economics estimates. Meanwhile, a slump in spending and crash in oil prices saw government tax revenues fall 31% in April, federal tax service head Daniil Yegorov told Putin. Revenues from oil and gas exports collapsed by more than half. 

More than a third of retail businesses have been shuttered, Economy Minister Maxim Reshetnikov said, with income across the sector down 25%. A total of 735,000 people have registered as unemployed over the last two months as the official unemployment rate begins to creep up.

Economists remain sceptical about the true number of job losses given the large size of Russia’s informal economy. Many, including Audit Chamber Head Alexei Kudrin, have predicted unemployment could hit 8 million this year. In a sign of the potential stress on Russian consumers, state revenues from personal income taxes — a proxy for official salaries — dropped by 14% in April.

More than a third of retail businesses have been shuttered, Economy Minister Maxim Reshetnikov said, with income across the sector down 25%. A total of 735,000 people have registered as unemployed over the last two months as the official unemployment rate begins to creep up.

Economists remain sceptical about the true number of job losses given the large size of Russia’s informal economy. Many, including Audit Chamber Head Alexei Kudrin, have predicted unemployment could hit 8 million this year. In a sign of the potential stress on Russian consumers, state revenues from personal income taxes — a proxy for official salaries — dropped by 14% in April.

(c)MOSCOW TIMES 2020

4 comments

  • Every extra week of restrictions costs the Russian economy 1% of its annual GDP, Oxford Economics estimates. Meanwhile, a slump in spending and crash in oil prices saw government tax revenues fall 31% in April, federal tax service head Daniil Yegorov told Putin. Revenues from oil and gas exports collapsed by more than half.

    Bye Bye Russia!

    Liked by 5 people

  • So now would be the time to hit them with crippling sanctions, to ensure that they never again murder their neighbours, steal their land and lie. As for that wealth fund, it should be used as a down payment for the loved ones of all the Georgians and Ukrainians they murdered and provide assistance to the huge numbers of people who suffered crippling injuries from their invader scum army.

    Liked by 6 people

  • Dmitry Bosov,a Russian super billionaire found ‘dead’ in the Russia. Putin needs every dollar to keep his own wealth.

    Liked by 3 people

  • onlyfactsplease

    Very good news for me is very bad news for mafia land; an economic collapse for mafia land.
    Let us hope that both the bat-virus in mafia land and worldwide low oil prices will continue wreaking havoc on the mafia economy.

    Liked by 2 people

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