MOSCOW, Russia – Russia’s economic growth slowed to 1.6% in the 1st quarter, the statistics agency said on Tuesday, May 19, before the full impact of the coronavirus and low oil prices made themselves felt.
The economy is expected to do much worse in the 2nd quarter to June when the full effects of a national coronavirus lockdown become apparent.
The preliminary estimate by the Rosstat agency for the first 3 months of 2020 was lower than both the economy ministry’s forecast of 1.8% and the growth rate for the final quarter of 2019 when Russia’s gross domestic product (GDP) expanded 2.1%.
The economy was boosted by agriculture, industry, trade, and food services.
Capital Economics consultancy said it expected the 2nd quarter figures to show a “collapse,” with the economy shrinking 13%.
“The outturn for Q2 will be much worse and with the virus outbreak not under control and fiscal support limited, the risk of a more sluggish economic recovery than we anticipate is rising,” it said.
Last year, Russia’s economy, long battered by Western sanctions and very dependent on high prices for its energy exports, saw growth slow to 1.3% from 2.5% in 2018.
Russian President Vladimir Putin had hoped to revive the economy with the help of a hugely ambitious “national projects” program launched last year, but low oil prices and the coronavirus outbreak have disrupted those plans.
The cental bank said in late March that the coronavirus outbreak would lead to a substantial decline in economic activity in the next few months.
It sees the country’s GDP dropping by up to 6% in 2020.
A nationwide lockdown, which was enforced in late March and is only beginning to be gradually relaxed, has battered the Russian economy, with entire industries grinding to a halt.
But the negative effects of the crisis were partly offset by an increase in consumption when many Russians in March rushed to make expensive purchases in anticipation of rising inflation.
That month also saw a spike in food consumption when many stocked up on foods to cope with the lockdown.
“In March, not all industries suffered, retail sales benefited,” said Sofya Donets, an economist at Renaissance Capital.
With Putin anxious to get the economy moving again, Russia last week moved to ease the nationwide quarantine.
In Moscow, some half a million construction and industrial workers were allowed back on the job, in a measure authorities said was expected to buttress the national economy.
Economy Minister Maxim Reshetnikov told Putin on Tuesday that economic activity was beginning to pick up, adding that forecasts would be presented to the government on Wednesday, May 20.
“The economy is beginning to recover,” Reshetnikov said, even though he cautioned against overly optimistic expectations about the speed of improvement.
The government has unveiled a series of measures to prop up the economy but refused to support ordinary Russians with coronavirus relief packages. (READ: Russia’s small businesses buckling under virus restrictions) – Rappler.com
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