Russia: the situation in economy is deteriorating on all fronts (Eurasianet, USA)

After the first victims of the pandemic industries — tourism, catering and entertainment — in the vortex of the crisis tightens industry, auto industry, banking sector and it. Companies reduce wages and cut staff, without jobs and income to millions of people.

The announced government measures to support cost 2.1 trillion rubles was unavailable for half of the enterprises. Consumers are tightening their belts and save on 90% of categories of goods and services.

The recession is imminent

Russia’s economy is “almost inevitably” will enter into recession in September and October 2020, according to the April report of the Center for business research. Recession is considered a decline in GDP for six consecutive months, says the report. In this case, the threat to the economic security researchers believe not the fall of the economy and loss of jobs, reduced incomes, increased poverty and inequality.

The Bank of Russia on 24 April lowered its key rate from 6% to 5.5% and issued a new macroeconomic forecast for the years 2020-2022. At the end of this year, the Central Bank expects economic decline by 4-6% and reduce export revenues by 40% (up to $250 billion to 419 billion dollars in 2019). Inflation is forecast to rise from 3% in 2019 to 3.8-4.8 per cent in 2020.

The head of the chamber Alexei Kudrin waiting for the decline of the economy at 7-8%, says RIA Novosti. According to the National rating Agency, the total damage for the most affected by the pandemic sectors of the economy will amount to 17.9 trillion rubles, without work there can be 15.5 million people, according to “Izvestia”.

Support is there to it

In his address of 28 April, Russian President Vladimir Putin extended days off until may 11 and instructed the government to develop new measures to support the economy and population.

The price received in March and April of measures to support the government estimated at 2.1 trillion rubles. Among the active measures — a delay of six months for all taxes except VAT and insurance contributions for small and medium businesses of the affected industries, the exemption of interest on loans, interest-free loans to pay salaries, payments to small and medium companies the minimum wage for each employee (130 12 thousand rubles), etc.

Meanwhile, the chamber of Commerce of the Russian Federation found in a survey of 21.6 thousand small businesses that more than half of them are unable to use the help as it was not included in the list of the most affected sectors, writes “Interfax”.

According to the survey, banks without explanation refused-thirds of businessmen in credit vacation loans salary, loans and restructuring of existing ones. About 50% of entrepreneurs will not apply to banks because they do not consider the proposed government measures are a real help.

Oil and the budget deficit

Crude oil prices 20th of April for the first time turned negative. According to RBC, the price of a futures contract for U.S. crude oil WTI with delivery in may fell below zero (to minus 38 per barrel). That is, sellers had to pay buyers for the transfer of futures.

The price of Brent crude April 27 fell below $ 20, this is the deepest decline since 1999. Russian oil to this day declined to 15.3 per barrel. At these prices, the budget deficit in 2020 may reach 8% of GDP, says with reference to the ITI Capital experts. This is 8.8 trillion rubles, or 42% of the budget of the country.

Russia’s budget could be balanced if the average price of a barrel of oil below $40-42,3, say the analysts of “Alpari”. Now the country at least a year have to live at an average price of 30-35 dollars or less, they say. In such circumstances, the budget will not sustain high costs, and many ambitious projects have to be postponed.

Millions will lose their salaries

According to the survey the Centre for strategic research, published at the end of April, 26% of companies have already been layoffs, another 35% reduction be allowed in the near future. Also 27% of the enterprises transferred employees to the contract system (removed for staff), another 32% expect it in the future. In addition, 30% have cut wages, 37% are ready to do it soon.

During the presentation, the founder of Superjob Alexei Zakharov said that the situation is deteriorating every day: if the mode of isolation will be extended until the end of may, the work can lose up to 20-25 million people.

In the savings Bank analyzed changes in the payroll. It turned out that many Bank customers from the areas of sport, recreation and entertainment, cut salaries by 33%, RIA Novosti reported. More than 35% of the companies in these areas generally stopped paying its employees, and 49% are paying less.

Catering cut the payroll by 24%, with about 18% of them do not pay the salary, and 68% have reduced its size. Hotels have reduced payroll by 24%, educational institutions — 21% of companies engaged in rental and leasing — 17%, retail trade — 15%.

IT and automotive industry join the victims

Under the stress scenario PwC that the company’s experts believe is more likely, the drop in sales of new passenger cars by the end of 2020 will amount to almost 30%. GAZ group (Gazelle produces and other light commercial vehicles) are expected to reduce production and sales by 50% over the year, said in an interview with TASS, its President, Vadim Sorokin.

It companies have started to optimise costs, including staff, writes “Kommersant”. A third of companies are going to send employees on unpaid leave, a quarter had layoffs or are going to do it, said the publication of the market participants.

The crisis in the industry

At the end of April, Rosstat reported on the growth of the industry in March by 0.3% in the first quarter by 1.5%. And it would be the only good news April, if not difficulties in this area.

PMI index reflecting the business activity of manufacturing industries in Russia in April fell to 31.3 points from 47.5 in March, according to a study from IHS Markit. This is the maximum decline since 1997, it is due to falling demand and rising prices for imported raw materials. In addition, the rapid pace of job cuts in the industry, the report noted. According to the forecast of IHS, Markit, at the end of the year, industrial production in Russia will fall by 3.8%.

A survey conducted by the Institute for economic policy. Gaidar, showed that industry expects a further decline in demand, reducing investment and staff, the fall in production volumes and the deterioration in the financial condition, write “Vedomosti”.

Citizens are tightening their belts

The company “ROMIR” published jointly with Boston Consulting Group study of consumer mood of the Russians: the fall in demand is observed in 90% of categories of products and services.

The buyers plan to spend less money on everything except fresh food products, medicines, home Internet and mobile communications, and utility payments. The greatest fall in demand is expected in travel and entertainment.

The banking crisis waiting in the fall

A third of banks ‘ loan portfolio could become problematic, said the Chairman of the Central Bank Elvira Nabiullina. It is about 19 trillion rubles, which are given to the most vulnerable borrowers, whose income has fallen dramatically: individuals, including entrepreneurs and companies most affected sectors.

According to first Deputy Chairman of the government Andrey Belousov, in this regard, a banking crisis can occur in autumn. According to him, 16 trillion 42 trillion rubles, issued by corporate borrowers, have on affected sectors of the economy, Interfax reported.

Alina Musina — the alias of a Russian journalist.