Until just a few weeks ago, Russian President Vladimir Putin was promising Russians their stagnant incomes would finally pick up along with the economy this year. But his oil market gambit and the fallout from coronavirus have all but demolished those hopes. As crude suffered its worst weekly collapse since 2008 following Russia’s bitter breakup with OPEC, economists slashed their growth forecasts. Even if oil stays roughly where it is now, the economy might not grow at all this year, Alexey Kudrin, a former finance minister who now runs a government oversight agency said last week.
“The Russian economy is experiencing a double shock this year from oil and the virus,” said Sofya Donets, an economist at Renaissance Capital in Moscow. “If the epidemic follows the European scenario, a recession is inevitable.” Putin appointed a new pro-spending cabinet in January headed by Prime Minister Mikhail Mishustin, who promised that people would “feel the difference” in their lives as soon as possible. On Monday he said the government has set up a 300-billion ruble fund ($4 billion) to assist businesses and citizens affected by the virus and will allow affected industries to pay taxes late.
Russia has only registered 63 cases of coronavirus so far, with no reported deaths, but the economy will be hurt by any signs of recession in the European Union, a major trading partner. The virus fallout could have an even bigger impact on the economy than low oil prices, Finance Minister Anton Siluanov said Saturday, according to RIA Novosti.