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The COVID-19 pandemic in Russia had an economic impact.
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The COVID-19 pandemic in Russia had an economic impact.
On 20 February, Minister of Finance Anton Siluanov said Russia is losing around 1 billion rubles each day because of decreased trade with China. [1]
On 5 March, the head of the Russian Association of Tour Operators said Russia's tourism sector had already taken a 27 billion ruble hit from the impact of the coronavirus. [2]
As a result of the pandemic, factory output and transportation demand fell, bringing overall demand for oil down as well, and causing oil prices to fall. This triggered an OPEC summit in Vienna on 5 March. At the summit, OPEC agreed to cut oil production by an additional 1.5 million barrels per day through the second quarter of the year. [3] OPEC called on Russia and other non-OPEC members of OPEC+ to abide by the OPEC decision. [4] On 6 March, Russia rejected the demand, marking the end of the partnership, with oil prices falling 10% after the announcement. [5] [6] On 8 March, Saudi Arabia initiated an oil price war with Russia, triggering a major fall in the price of oil around 30%. [7] The price war is one of the major causes of the currently ongoing global stock market crash. As the result of the oil price falling, the Russian ruble suffered a fall hitting a four-year low against the U.S. dollar. [8]
On 17 March, First Deputy Minister of Transport and Federal Air Transport Agency head Alexander Neradko said cancellation of international flights during the pandemic threatens to bankrupt multiple Russian airlines. Russian airlines lost an estimated 1.7 billion rubles due to the cancellation of flights to China in February. According to Neradko, airlines could lose another 100 billion rubles in revenues by the end of the year. [9]
On 23 March, Russia's federal list of "systemically important" companies was expanded to three times, featuring about 600 businesses. According to Vedomosti, the updated list includes new airlines (Rossiya, S7, Utair), airports (Moscow Domodedovo, Saint Petersburg Pulkovo), grocery chains (Vkusvill , Auchan), fast food chains (McDonald's, Burger King), and retail shops (Sportmaster , IKEA). [10]
On 24 March, Mayor of Moscow Sergey Sobyanin issued orders to support businesses which include postponing payments on organisations’ property and land taxes, deferring rental payments, reducing payments fixed in trading contracts and extending the deadlines for paying trade fees. On 25 March, President of Russia Vladimir Putin announced following measures for microenterprises, small- and medium-sized businesses: deferring tax payments (except Russia's value-added tax) for the next six months, cutting the size of social security contributions in half, deferring social security contributions, deferring loan repayments for the next six months, a six-month moratorium on fines, debt collection, and creditors’ applications for bankruptcy of debtor enterprises. Additionally, a new tax on income from large deposits will be introduced in 2021, and the tax on offshores will be increased. [11] [12] [13] On 27 March, the Association of Banks of Russia reported an increase of deposits closure. [14]
On 25 March, associations of companies of online shopping, retail, culinary, and nine other industries sent a letter to Prime Minister Mishustin, in which they warned of a possible collapse of their businesses and asked for numerous additional measures of support. [15] On 26 March, a petition signed by publishing houses and bookshops pleading for support was published. [16]
On 30 March, owners of hotels and restaurants asked the government for 1-year tax deferral and other fiscal measures. [17]
On 1 April, nearly 1.4 trillion rubles had been earmarked for fighting the virus and the pandemic's economic impact. [18]
Aeroflot′s low-cost carrier Pobeda Airlines announced it would stop flights on 1 April until 31 May. [19]
Sberbank and VTB Bank with backing from the Central Bank will start offering six-month, interest-free loans to businesses to help them pay employee salaries. [20]
The Eurasian Economic Union will ban export of the onions, garlics, turnips, rye, rice, buckwheat, proso millets, groats, whole-wheat flour, granules of cereal grain, pealed buckwheat grain, buckwheat ready meals, soybeans, sunflower seeds from 10 April to 30 June. [21]
On 14 April 2020, the International Monetary Fund projected Russia's real GDP growth rate to be −5.5% for 2020 in what it called "The Great Lockdown". [22] International ratings agency Moody's said in late April that it expected Russia's GDP to decline by 5.5% in 2020, with it growing by 2.2% in 2021. [23]
On 16 April, Minister of Economic Development Maxim Reshetnikov said that Russia is set to spend over 2 trillion rubles to counter the pandemic's effects. [18]
On 24 April, the Central Bank of Russia cut its key interest rate by 50 basis points to 5.5%. [18]
On 18 May, the Federal Air Transport Agency said that it allocated 7.89 billion rubles to Aeroflot as a partial compensation for losses due to the pandemic. It said it would consider applications from 6 more companies. Overall, the government had allocated 23.4 billion rubles to compensate for losses to airlines. [24]
On 2 June, Prime Minister Mishustin said that the government would launch a 5 trillion ruble ($73 billion) recovery plan in the next month to counteract against the pandemic's economic effects. The program would last until the end of 2021 with the target of bringing the unemployment rate back to under 5% and economic growth of 2.5% a year. It was reported that the plan would include greater daily spending from the federal budget and lost tax revenues, and that the recovery package could overall be worth 7.3 trillion rubles ($106 billion) once long-term infrastructure projects, which isn't counted against the regular annual budget, are included. Mishustin said that the program was divided into 3 stages consisting of "stabilisation" (until end of 2020), "recovery" (until mid 2021) and "growth" from Q4 of 2021. It also outlines structural changes to labour regulations, including a new hourly minimum wage to support part-time work, encourage employment and decrease the size of the shadow economy. It is also planned to increase real wage growth by 2.5% and reduce the poverty rate of 12.3% in 2019. [25]
On 23 June, President Putin, in a televised address, announced additional economic and social support measures as a result of the pandemic's impact. He announced the end of Russia's flat income tax rate of 13% that he introduced in 2001 by increasing the tax rate for the top earners who earn over 5 million rubles to 15%, starting from 1 January 2021. He said that the extra revenue of around 60 billion rubles would go towards helping children with severe or rare diseases. He also announced other measures including increased benefits to families where both parents have lost their job and a one-off payment to families in July of 10,000 rubles for each child they have aged under 16. 100 billion rubles would also handed out in loans for businesses to pay employees. He also said that IT companies would benefit from an ultra-low tax regime and profits tax for them would be cut from 20% to 3%. [26] [27] [28]
On 17 July, Reuters reported that the economy shrank by 9.6% year-on-year in the 2nd quarter, the most in 20 years, according to the economy minister. Real disposable incomes fell by 8% in year-on-year terms in April to June according to Rosstat. It also said that Russia's industrial output fell by 9.4% in June compared to a year ago. [29]
On 22 July, the economy minister, Maxim Reshetnikov, was quoted as saying that Russia's GDP declined by 4.2% in the first half of 2020. He said that this ministry was maintaining its 2020 forecast of a decrease of 4.8%, but that it would be revised in August. [30]
On 4 August, the head of the Federal Tourism Agency, Zarina Doguzova, said that total losses for the tourism industry amounted to about 1.5 trillion rubles, with losses from the closure of the borders amounting to around 500 billion rubles. [31]
On 20 August, the economy minister said that GDP fell 4.7% in July, compared to having fallen 6.4% in the previous month. [32]
On 11 August, Reuters reported that the economy contracted by 8.5% in the second quarter, after growing by 1.2% in Q1, however this was less than expected. Rosstat said that only the agriculture sector grew in Q2, while commodity, retail, transport and services sectors were hardest hit. According to the central bank, the economy is likely to shrink by 4.5-5.5% for the whole of 2020 before starting to grow again in 2021. [33]
The economy of Russia is a high-income, industrialized, mixed market-oriented economy. It has the eleventh-largest economy in the world by nominal GDP, the sixth-largest economy by GDP purchasing power parity (PPP) according to the IMF, and fourth-largest economy by GDP (PPP) according to World Bank. Due to a volatile currency exchange rate, its GDP measured in dollars fluctuates sharply. Russia was the last major economy to join the World Trade Organization (WTO), becoming a member in 2012.
Russia's energy policy is presented in the government's Energy Strategy document, first approved in 2000, which sets out the government's policy to 2020. The Energy Strategy outlines several key priorities: increased energy efficiency, reducing the impact on the environment, sustainable development, energy development and technological development, as well as improved effectiveness and competitiveness. Russia's greenhouse gas emissions are large because of its energy policy. Russia is rich in natural energy resources and is one of the world's energy superpowers. Russia is the world's leading net energy exporter, and was a major supplier to the European Union until the Russian invasion of Ukraine. Russia has signed and ratified the Kyoto Protocol and Paris Agreement. Numerous scholars posit that Russia uses its energy exports as a foreign policy instrument towards other countries.
The Russian National Wealth Fund is Russia's sovereign wealth fund. It was created after the Stabilization Fund of the Russian Federation was split into two separate investment funds on 30 January 2008.
Russia–Saudi Arabia relations are the bilateral relations between the Russian Federation and the Kingdom of Saudi Arabia. The two countries are referred to as the two petroleum superpowers and account for about a quarter of the world's crude oil production between them.
The Great Recession in Russia was a crisis during 2008–2009 in the Russian financial markets as well as an economic recession that was compounded by political fears after the war with Georgia and by the plummeting price of Urals heavy crude oil, which lost more than 70% of its value since its record peak of US$147 on 4 July 2008 before rebounding moderately in 2009. According to the World Bank, Russia's strong short-term macroeconomic fundamentals made it better prepared than many emerging economies to deal with the crisis, but Russia's underlying structural weaknesses and high dependence on the price of a single commodity made the crisis' impact more pronounced than would otherwise be the case.
After the dissolution of the Soviet Union in 1991 and the end of its centrally-planned economy, the Russian Federation succeeded it under president Boris Yeltsin. The Russian government used policies of shock therapy to liberalize the economy as part of the transition to a market economy, causing a sustained economic recession. GDP per capita levels returned to their 1991 levels by the mid-2000s. The economy of Russia is much more stable today than in the early 1990s, but inflation still remains an issue. Historically and currently, the Russian economy has differed sharply from major developed economies because of its weak legal system, underdevelopment of modern economic activities, technological backwardness, and lower living standards.
The federal budget of Russia is the leading element of the budget system of Russia. The federal budget is a major state financial plan for the fiscal year, which has the force of law after its approval by the Russian parliament and signed into law by the President of Russia. That the federal budget is the primary means of redistribution of national income and gross domestic product through it mobilized the financial resources necessary to regulate the country's economic development, social policy and the strengthening of the national defense. The share of federal budget accounts for a significant portion of the distribution process, which is the allocation of funds between sectors of the economy, manufacturing and industrial areas, regions of the country.
International sanctions have been imposed against Russia and Crimea during the Russo-Ukrainian War by a large number of countries, including the United States, Canada, the European Union, and international organisations following the Russian annexation of Crimea, which began in late February 2014. Belarus has also been sanctioned for its cooperation with and assistance to Russian armed forces. The sanctions were imposed against individuals, businesses, and officials from Russia and Ukraine. Russia responded with sanctions against several countries, including a total ban on food imports from Australia, Canada, Norway, Japan, the United States, the EU and the United Kingdom.
The financial crisis in Russia in 2017 was the result of the sharp devaluation of the Russian rouble beginning in the second half of 2014. A decline in confidence in the Russian economy caused investors to sell off their Russian assets, which led to a decline in the value of the Russian rouble and sparked fears of a financial crisis. The lack of confidence in the Russian economy stemmed from at least two major sources. The first is the fall in the price of oil in 2014. Crude oil, a major export of Russia, declined in price by nearly 50% between its yearly high in June 2014 and 16 December 2014. The second is the result of international economic sanctions imposed on Russia following Russia's annexation of Crimea, the war in Donbas and the broader Russo-Ukrainian War.
Events in the year 2020 in the Russian Federation.
Mikhail Vladimirovich Mishustin is a Russian politician and economist serving as the Prime Minister of Russia since 16 January 2020. He previously served as the director of the Federal Taxation Service from 2010 to 2020.
The COVID-19 pandemic in Russia was a part of the pandemic of coronavirus disease 2019 caused by severe acute respiratory syndrome coronavirus 2.
On 8 March 2020, Saudi Arabia initiated a price war on oil with Russia, which facilitated a 65% quarterly fall in the price of oil. The price war was triggered by a break-up in dialogue between the Organization of the Petroleum Exporting Countries (OPEC) and Russia over proposed oil-production cuts in the midst of the COVID-19 pandemic. Russia walked out of the agreement, leading to the fall of the OPEC+ alliance.
On 20 February 2020, stock markets across the world suddenly crashed after growing instability due to the COVID-19 pandemic. It ended on 7 April 2020.
Economic turmoil associated with the COVID-19 pandemic has had wide-ranging and severe impacts upon financial markets, including stock, bond, and commodity markets. Major events included a described Russia–Saudi Arabia oil price war, which after failing to reach an OPEC+ agreement resulted in a collapse of crude oil prices and a stock market crash in March 2020. The effects upon markets are part of the COVID-19 recession and are among the many economic impacts of the pandemic.
The COVID-19 recession was a global economic recession caused by COVID-19 lockdowns. The recession began in most countries in February 2020. After a year of global economic slowdown that saw stagnation of economic growth and consumer activity, the COVID-19 lockdowns and other precautions taken in early 2020 drove the global economy into crisis. Within seven months, every advanced economy had fallen to recession.
This is an economic history of the 2020s. Economic history refers to the study of economies or economic events of the past, including financial and business history.
The economic impact of the Russian invasion of Ukraine began in late February 2022, in the days after Russia recognized two breakaway Ukrainian republics and launched an invasion of Ukraine. The subsequent economic sanctions have targeted large parts of the Russian economy, Russian oligarchs, and members of the Russian government. Russia responded in kind. A wave of protests and strikes occurred across Europe against the rising cost of living.
Following the full declaration of the Russian invasion of Ukraine, which started on 24 February 2022, institutions such as the United States, the European Union, and other Western countries introduced or significantly expanded sanctions covering Russian President Vladimir Putin, other government members and Russian citizens in general. Some Russian banks were banned from using the SWIFT international payments system. The sanctions and the boycotts of Russia and Belarus have impacted the Russian economy in various ways.
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