The Bank of Russia on Friday said the economy would shrink by up to six per cent this year, recover at 2.8 to 4.8 per cent next year and go on to 1.5 to 3.5 per cent in 2022. AFP
Russia's central bank on Friday said the economy would shrink by up to six per cent this year, as hopes of a revival were dashed by the coronavirus and falling oil prices.
“The Bank of Russia has substantially reviewed its baseline scenario parameters. GDP [gross domestic product] is forecast to decrease by four to six per cent in 2020,” it said in a statement.
Measures to prevent the spread of the coronavirus and the decline in oil prices have had “a substantial negative impact on economic activity”, it said.
Growth will start to recover at 2.8 to 4.8 per cent next year and go on to 1.5 to 3.5 per cent in 2022, it said, while predicting the price of oil to rise from $27 per barrel to $35 in 2021 and $45 in 2022.
The board of directors also cut the bank’s key interest rate by 0.5 percentage points to 5.5 per cent.
It was the first time since early 2014 that the rate has been cut this low, and the bank said it “holds open the prospect of further key rate reduction”.
“The situation has changed dramatically” since the board last met in March, with “significant restrictive measures” introduced worldwide slowing down the economy, it said.
The central bank expects Russia’s exports to fall by 40.3 per cent to $250 billion this year, and imports by 18.5 per cent to $207 billion, reported the non-governmental Interfax News Agency JSC.
Central bank governor Elvira Nabiullina said the moment called for timely and forward-thinking decisions to “curb negative trends” and for a “faster normalisation of the economic situation after the withdrawal of the restrictions”.
The price of oil, a key Russian export, had plummeted even before the coronavirus lockdown due to a price war between Russia and Saudi Arabia after Moscow refused to cut supply.
But after the world’s exporters agreed to cut output this month, crude has begun to recover.
Russian President Vladimir Putin on Thursday said that while coronavirus poses a serious health threat, the pandemic’s “impact on the economy, on entire sectors, is just as dangerous”.
The Capital Economics consultancy predicted that “emerging Europe will experience its largest decline in real GDP this year since the collapse of the Soviet Union”.
Putin first announced the country’s version of the lockdown – a “non-working” week – on March 28, later extending it to the end of this month.
He said companies would be expected to pay salaries in full, even if work activity could not continue.
The government has been phasing in anti-crisis measures, such as loan payment deferrals or cheap loans, but Putin conceded on Thursday that many Russians cannot access the relief.
Banks “either deny immediately, take a long time or make impossible demands”, he said.
In an analysis of the anti-crisis measures so far, Alfa Bank said direct aid has amounted to just 0.3 per cent of the GDP and was lower than in other countries.
