Staunton, December 16 – Russians and their government have been placing such great hopes about next year when they believe that their country will exit the pandemic that they are setting themselves up for a major disappointment because Russia’s economic situation then will be much worse than it was in 2014, Natalya Zubarevich says.
The pandemic hit Russia and undermined its economy even before the country could recover from the decline which began in 2015, the director of the Independent Institute for Social Policy told a conference organized by the Sakharov Center, Memorial, and the Levada Center (rosbalt.ru/moscow/2020/12/16/1878397.html).
Outcomes like increasing budget deficits in the regions and bankruptcies have been postponed, the first by massive subsidies from Moscow and delays the second in required payments and filings, but both these things will hit hard early next year, compounding declines in incomes, Zubarevich says.
The pandemic drove down purchases of Russian goods and Russian industry has found it difficult to adapt to the new reality. As a result, it is not currently in a position to take off again even after the coronavirus pandemic passes. Instead, it is likely to suffer further declines given lower demand and problems in finding investment.
Even construction shows no sign of recovery. Declines there began before the pandemic hit, and then they accelerated. And the same pattern holds in retail trade, services, and employment, all of which have driven incomes down. But because the pandemic has not been the only cause, eliminating it from the picture won’t solve Russia’s problems.
“The most surprising story of the current crisis,” the Moscow expert on regional economics says, is that the budget deficits of the regions have soared but not as much as they might have because Moscow has transferred far more money to them, 56 percent more than a year earlier. But the regional budgets are still short and many will be in trouble in 2021.
What has been disturbing, Zubarevich continues, is that some regions have been aided far more than others, with the criteria and decision-making process about that becoming ever less transparent. That means that regions can’t plan and that parts of the country are going to suffer far more than others.
And those that do will see their economies decline domino fashion. Next year, many places expect a run of bankruptcies of small and mid-sized businesses, something that has not happened already but that nothing will be able to stop unless the government provides massive subsidies, an unlikely possibility.
But the biggest reason for concern and the one that is likely to have the most immediate impact politically is that the government has not been providing enough help to the population, Zubarevich says. “As a result, Russia will only very slowly come out of this crisis,” despite the expectations of many, encouraged by the authorities, that a return to normal will be quick.
Moreover, she adds, even if things do return to where they were before the pandemic hit early this year, Russians will find themselves in an economic situation significantly worse than the one they did seven years earlier, hardly the basis for optimism about developments anytime soon.