The Ministry of Economic Development has announced the timing of the return of the economy to a pre-crisis level
The Ministry of Economic Development predicts a fall in Russia's GDP by 5% in 2020, and real disposable income - by 3.8%, follows from the forecast of the department. Final quarantine removal is expected in August-September 2020
The Ministry of Economic Development predicts a 5% drop in GDP by the end of 2020, follows from the main parameters of the basic forecast of socio-economic development of Russia.
There will be no quick, V-shaped economic recovery: growth in 2021 will amount to only 2.8%. “Obviously, there will be a certain rebound, but it will be very low, and then we have a long way to go uphill,” Economic Development Minister Maxim Reshetnikov told reporters.
The main blow of the pandemic crisis will be in the second quarter of 2020, when GDP will decrease by 9.5%, in the third quarter the economic decline will be 6.3%, and in the fourth quarter - 5.2%.
The agency laid down the macro-forecast conditions in the scenario for the removal of all quarantine restrictions in August-September 2020 aimed at containing the spread of coronavirus infection in Russia, Reshetnikov said. “August — September — the final lifting of restrictions. So far what we have laid. I emphasize that everything depends on the epidemiological situation, ”he said, adding that part of the sanitary requirements (mandatory mask regimen, social distance, etc.) will remain until the vaccine against COVID-19 appears.
After the recovery growth of GDP in 2021 (by 2.8%), the ministry expects that the growth rate of GDP will be 3% in 2022 and 3.1% in 2023. “Speaking in average annual terms, while reaching the pre-crisis level is the first half of 2022,” the head of the Ministry of Economic Development explained.
Oil and the ruble
Conservative prerequisites for the price of Russian Urals oil are laid down in the scenario conditions for the forecast, according to which in June-December 2020 it will be below $ 30 per barrel. and will recover to $ 40 only by the end of next year, said the head of the Ministry of Economic Development. The basic forecast includes the average annual price of Urals oil at $ 31.1 per barrel this year and its subsequent increase to $ 35.4 and $ 42.2 per barrel in 2021 and 2022, respectively.This means that the average annual price of Urals will remain below the base price under the budget rule ($ 42.4 in 2020 plus 2% annually) for all four years, until 2023, when it will practically catch up with the cut-off price. In the coming years, the Ministry of Finance will have to finance lost oil and gas revenues from the National Wealth Fund (NWF).
Given the forecasted oil prices, the average annual ruble exchange rate is expected to reach 72.6 rubles in 2020. for a dollar. In 2021 - 74.7 rubles / $, in 2022 - 73.3 rubles / $. “The effect of transferring the exchange rate to consumer prices in March-April, we believe, is practically exhausted. Further acceleration of inflation will be constrained by restrictions on consumer demand, so we will not exceed the target of 4%, ”said Reshetnikov. According to the agency’s basic forecast, annual inflation will be 4% in 2020 and will remain at this level throughout the forecast period (up to 2023).
Budget deficit and fiscal stimulus
The budget deficit this year is projected at 8.5% of GDP after a surplus of 1.8% of GDP in 2019. “Thus, we have a general easing of fiscal policy in 2020 in the amount of 10% of GDP, which is a fairly tangible fiscal stimulus,” Reshetnikov said, emphasizing that it exceeds the fiscal stimulus of most developing countries. The forecast implies the effect of the implementation of three anti-crisis packages of measures to support the economy and the population, but the action of the national economic recovery plan, which the agency will submit to the government on May 25, has not yet been taken into account.Investments in fixed assets this year will fall by 12% after an increase of 1.7% in 2019. In 2021, the Ministry predicts recovery growth of investments by 4.9%, by 5.6% in 2022, and by 5.7% in 2023.
Industry outlive
A fall of 5.4% in 2020 and will reach a growth rate of 3.3% in 2021 and 2022, in 2023 it is expected that industrial production will grow by 3.4%.The main contribution to reducing GDP in 2020 will be made by consumer spending, expects the Ministry of Economic Development. Retail sales will decrease this year by 5.2%, followed by recovery in 2021 (an increase of 4%).
Income and unemployment
This year, real disposable incomes of the population will decrease by 3.8% due to the pressure of falling real wages. In the second quarter, real income will fall by 6% in annual terms, Reshetnikov said. According to him, without additional measures to support the population, the reduction could reach 7.5%. In the structure of the population’s cash income, entrepreneurial income, property income, as well as other cash receipts, which include shadow income, are expected to fall most strongly in the Ministry of Economic Development. In 2021, real disposable income is expected to grow by 2.8%, and by 20% in 2022.For 2020, the Ministry of Economic Development envisages a moderate increase in unemployment, the average annual unemployment rate will be 5.7% of the economically active population after 4.6% in 2019. In 2021, the average annual unemployment rate is expected to decrease to 5.4%, in 2022 - to 4.9%, in 2023 - to 4.7%. “We expect a significant convergence of the registered unemployment and unemployment rates according to the methodology of the International Labor Organization,” Reshetnikov added. As part of the government’s anti-crisis program, the maximum unemployment benefit increased to the minimum wage level (12.13 thousand rubles)
The agency’s basic forecast suggests that global GDP will decline by 2.5–3% according to the results of the current year with a gradual recovery in 2021 (an increase of 3.5–4%). “You have to understand that the situation with coronavirus will have long-term structural consequences,” Reshetnikov noted. In 2020, the global economy will experience the deepest recession since the Great Depression of 1929-1933, the global GDP decline will be 3%, the International Monetary Fund (IMF) expects. Russia's GDP will decline by 5.5% in 2020, the IMF predicts.
Difference from other forecasts
The ministry’s GDP forecast for 2020 is close to the estimate of the Bank of Russia, which expects a 4–6% recession in the Russian economy, followed by 2.8–4.8% growth in 2021 and 1.5–3.5% in 2022.If the fall in GDP predicted by the Ministry of Economic Development in 2020 corresponds to consensus forecasts (for example, the consensus of 28 experts surveyed by the HSE is minus 4.3%), then the remaining indicators are somewhat out of line when compared with analysts' estimates. Experts interviewed by the HSE expect a slightly weaker ruble and inflation above 4%.
The Ministry of Economic Development was supposed to present scenarios of socio-economic development of Russia taking into account the impact of the coronavirus pandemic by April 9, but postponed the development of macro forecasts for a later date due to the uncertain situation with the spread of coronavirus. The parameters of the new macroeconomic forecast will be specified in August and September, Reshetnikov added.