Russian economic forecast better than expected

RUSSIA / FSU POLITICS - In Brief 01 Sep 2020 by Alex Teddy

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On August 31 it was reported that the government anticipates that coronavirus will inflict less harm on the economy than previously envisaged. The Ministry of Economic Development said that the GDP will be 3.9% down in 2020. Originally this fall was forecast to be 5%. Investment is estimated to fall 6.6% not 12% as previously stated. Not many experts trust the government's statistics. However, the general trend of coronavirus being less economically harmful that originally thought is broadly accepted.Coronavirus has had a deleterious effect on the economy but it has not been as severe as in EU countries. The EU has witnessed an eyewatering 8.5% economic contraction in Q2 2020. In the UK it is 20%!Russia's lockdown eased early and there is no sign of it coming back despite coronavirus cases passing one million on August 31. Schools reopened on September 1. Customer services are not so vital to the Russian economy and this sector is the most seriously hurt by lockdown. Russian economic activity is at about 95% of the level it was in February: the last full month before lockdown. The Russian Central Bank's interest rate cuts have helped. Global oil prices have risen to not far below pre-lockdown levels. The RUB's fall has been significant but not disastrous. Income compression may have serious long term repercussions which have not yet been felt. A second lockdown would also alter the picture. It seems that Moscow is keen to avoid a second lockdown even if coronavirus deaths increase significantly.