​Russia: Pandemic update

RUSSIA ECONOMICS - In Brief 15 Apr 2020 by Alexander Kudrin

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Russia’s inflation w-o-w showed no signs of an acceleration in the past seven-day period ending on April 13, and reached 0.2% w-o-w (versus 0.3% a week earlier). It is likely that in April inflation may be around 1% and similar level of inflation can be expected in May. If so, then in May the y-o-y inflation will exceed the CBR 4% target with a clear trend of accelerating y-o-y in the summer (as m-o-m inflation in summer and on the early Autumn in 2019 was on average at zero). It is not clear what the CBR can do in such an environment, as the economy will need support amid rising inflation.The Russian authorities continue to discuss how to address mounting problems and which measures could to support businesses. More business-friendly support was offered recently. As GKEM Analytica expected, in addition to subsidized and guaranteed the state financial institutions loans to be provided to businesses, some of them will get direct financial support from the state - to retain the workforce and pay wages as economic activity keeps plunging. The recipients of such support need to retain at least 90% of the workforce. Subsidized credits will be also offered to increase working capital. Regions will get additional R200 bn as well. Support will be granted to airline carriers (R23 bn). Newly proposed measures do not look groundbreaking, but they are helpful, and won’t destabilize the budget. However, it gets increasingly likely that more measures will be needed, as there are signs that the movement restrictions in the country are set to get tighter. There are signs that the spread of the decease may not decelerate yet. It cannot be ruled out that in the next few days, or even we...