The economic downturn caused by the pandemic was short-lived for Russia. The situation began to recover in the fourth quarter of 2020, when the authorities decided not to introduce a nationwide lockdown. Bloomberg experts were surprised by this phenomenon and talked about further growth prospects.
According to Rosstat, GDP in the fourth quarter contracted by 1.8%, which is less than the initial forecast of 2.2%. The forecast for the full year was also revised from 3.1% to 3%.
Bloomberg notes that Russia is steadily emerging from the pandemic recession. The world’s largest energy exporter has shrunk less than many of the countries it competes with in the market. Russia introduced softer restrictions to combat COVID-19 immediately after the first lockdown, which was in the spring of last year. The country’s service sector, which accounts for a small share of total GDP, also emerged from 2020 relatively unaffected.
However, there were problems with inflation, which was provoked by the rise in world food prices and the subsequent weakening of the ruble. This prompted the Bank of Russia last month to raise its key rate for the first time since 2018 with a view to further growth.
The government intends to downgrade its economic growth forecast for 2021 from 3.3% after Rosstat reported a smaller cut last year, Economic Development Minister Maxim Reshetnikov said on Thursday, Interfax reported. According to him, the results of the first quarter should be at the level of the last three months of 2020.
“After a surprisingly small downturn in 2020, the recovery is expanding, aided by slower outbreaks, progress in vaccinations and higher oil prices. The virus remains a threat. It is still a long way off, but production may return to pre-viral levels by the fourth quarter of 2021,” – said Scott Johnson, an economic expert at Bloomberg.
The Russian government is gradually loosening its response to the pandemic and is also planning to increase spending on infrastructure this year, including through its $ 182 billion wealth fund. Finance Minister Anton Siluanov said that the money from the fund can begin to be used in the first half of this year.
At current oil prices, the economy could grow by about 2.5% this year, said Alexandra Suslina, a budget specialist at the Moscow-based think tank Economic Expert Group.
“The economy is slowly recovering. Spending from the welfare fund will improve economic performance, but will not bring Russia to a new level of growth. This will be a short-term impact,” Suslina said.
The volatility of the ruble and the surge in inflation are putting additional pressure on the worsening living standards of Russians. The government has resorted to price controls on some staple foods to try to curb inflation, which grew at its fastest pace in February since 2016. According to the Central Bank estimates, the rise in consumer prices as of March 15 reached 5.8%.
While countries across Europe are experiencing a third wave of COVID-19 infections, pushing some governments towards new lockdowns, Russia continues to loosen restrictions as reported cases decline. However, the official campaign to promote mass vaccination has not yet attracted much public response.
Although the program was launched in December, only about 4.3% of the Russian population received the first dose of the vaccine, compared with 11% in Turkey, almost 30% in the US and almost 50% in the UK.
“While the percentage of the population vaccinated remains low, Russia will continue to be at risk of a devastating third wave that could damage the prospects for recovery. In my opinion, public uncertainty about vaccinations poses a significant risk to the short-term economic outlook,” Tatyana said. Orlova, analyst at Emerginomics in London.
Earlier, the World Bank adjusted its forecast for the growth of the Russian economy in 2021. The regulator’s experts positively assessed the actions of the Russian government in the coronavirus pandemic. In their opinion, the economy of the Russian Federation in the next three years will face the recovery of the pandemic and stable growth.