According to a study by HSE experts, Russia for the first time in the entire post-Soviet period experienced a milder recession than the world as a whole. So, in 2020, against the backdrop of the coronavirus pandemic and the massive introduction of quarantine restrictions, the country’s GDP fell by 3.1%, while the global indicator decreased by 3.5%. Experts attribute this to the authorities’ anti-crisis measures, the policy of the Central Bank and the operation of the budget rule.
For the first time in the past 30 years, Russia has weathered the global crisis better than the world as a whole. This is the conclusion reached by economists from the Center for Development Institute of the Higher School of Economics.
According to experts in their study, in 2020, against the background of the coronavirus pandemic, weakening consumer activity and the collapse of oil prices, Russia’s GDP decreased by 3.1%. At the same time, the overall decline in the world economy turned out to be deeper and amounted to 3.5%.
“For the first time in the entire post-Soviet period, Russia experienced a milder recession than the world as a whole, despite the fact that a strong drop in oil prices was combined with the global crisis,” the bulletin says.
The authors of the report recalled that in 2015, Russia’s GDP fell by 2%, while the global economy, on the contrary, showed an increase of 3.4%. Also, as an example, experts cite the consequences of the global financial crisis, when in 2009 the Russian economy fell by 7.8%, and the global one by only 0.1%.
According to economists, measures of state support for the population and business largely helped to curb the economic downturn in 2020. As Russian President Vladimir Putin previously noted, in total, the authorities allocated about 4.6 trillion rubles, that is, about 4.5% of GDP, to fight the consequences of the COVID-19 pandemic last year.
The key anti-crisis measures of the authorities were direct payments to families with children and subsidies to the affected sectors of the economy, credit holidays, grants and soft loans to enterprises to pay salaries to employees. In addition, the authorities have agreed on tax deferrals and exemptions for companies and entrepreneurs. At the same time, the state launched a preferential mortgage program at 6.5% per annum and a cashback program for trips across Russia to support tourism.
“As part of the authorities’ anti-crisis policy, it is worth noting the decisive actions of the Central Bank, which lowered the key rate by two percentage points at once – to 4.25% per annum, the lowest level in the entire post-Soviet history. The actions of the regulator supported lending and allowed the government to get by with less budgetary spending to help the economy, ”said Valery Mironov, deputy director of the Center for Development Institute at the Higher School of Economics, in an interview with RT.
According to the authors of the study, if it were not for government support measures, the rate of decline in the Russian economy would have been much higher and amounted to 7-8%.
Margin of safety
Economists are sure that the inflation targeting regime carried out in recent years has helped Russia better prepare for the global crisis. As a reminder, as part of its monetary policy, the Central Bank maintains inflation close to the target level of 4%. Thus, the regulator is trying to ensure price stability in the country.
“It should be noted that inflation targeting assumes a floating exchange rate. This increased the competitiveness of Russian goods during the pandemic, since the weakening of the ruble made our exports more profitable. And although to a certain extent we had to sacrifice imports, since foreign products became more expensive, during the crisis we were able to increase the supply of many of our goods abroad. Due to this, the budget received additional revenues, ”Mironov added.
The peculiarities of the structure of the national economy also helped to mitigate the recession in Russia. This point of view in a conversation with RT was expressed by Igor Nikolaev, director of the Institute for Strategic Analysis of the audit and consulting company FBK Grant Thornton.
“During the pandemic and massive lockdowns, the service sector was hit hardest. That is, we are talking about the consumer sector, which in many Western countries accounts for up to half of GDP. Therefore, the drop in consumer demand and the decline in population mobility have had a heavy impact on the economies of several countries. In our country, the share of this sector is not so significant, in contrast to industry, which makes a significant contribution to the formation of GDP. To some extent, this has served us as a competitive advantage, ”Nikolayev explained.
In addition, the budgetary rule provided support to the economy. Under this mechanism, excess oil profits above the cut-off price ($ 43.3 per barrel) go to the National Welfare Fund (NWF), and not to current budget needs. According to HSE experts, such a policy made it possible to adapt treasury expenditures to the relatively low cost of raw materials and reduce the impact of oil prices on the economy.
According to a study by economists, in 2021 the Russian economy will recover and may grow by about 2.8%. At the same time, the final values may turn out to be noticeably higher. The head of FC Otkritie bank Mikhail Zadornov told about this in an interview with RT.
“We forecast GDP growth of 3–3.5% in 2021. It is still difficult to make more accurate predictions, since there is no clear understanding of how long vaccination will take in Russia and, accordingly, when restrictions on many activities will be completely lifted. Nevertheless, it is clear that, most likely, this will happen already somewhere in the second half of the year, so we count on recovery growth, ”the specialist emphasized.