We have reduced substantially our forecast for Russian GDP growth to -1 % for this year due to notably lower commodity prices and a weakened outlook for the global economy. We expect Russian GDP to return to moderate growth next year. Higher government spending supports the economy. In the current situation risks are exceptionally large and Russia’s economic development can turn out considerably weaker if the global uncertainty caused by the corona pandemic is prolonged. Given the unlikely prospects for major structural economic reforms, Russia’s longer-term growth potential remains moderate.
China’s economic growth was already slowing before the outbreak of the coronavirus epidemic in the latter half of January. The epidemic and strict measures imposed by the government to rein in the accelerating infection rate brought China’s economy to a standstill. While we are now witnessing a recovery of the economy that is supported by stimulus measures, it is clear that some lost production will never be made up. Accordingly, our forecasts have been revised downwards. We now estimate that China’s real GDP will turn negative this year, but as the situation normalizes, growth is likely to be impressive next year before falling back to the earlier trend. Downside risks have dramatically increased due to the unpredictable fallout from the coronavirus pandemic.
For further information
Russia: Senior Economist Heli Simola
tel. +358 9 183 2263 / heli.simola(at)bof.fi
China: Adviser Jouko Rautava
tel. +358 9 183 2280 / jouko.rautava(at)bof.fi
Russia and China: BOFIT Head Iikka Korhonen
tel. +358 9 183 2272 / iikka.korhonen(at)bof.fi