The coronavirus pandemic and turbulence in the global oil markets have battered the Russian economy this year. Preliminary data suggest GDP contracted by 8 % y-o-y in the second quarter. In recent months, however, the economy has begun to claw its way back. Recovery is now expected to continue for the rest of this year, albeit slower than the initial sharp rebound. Due to the sharp drop in output last spring, our latest BOFIT Forecast for Russia, which was released last week, sees GDP contracting by 4 % this year and growing by slightly over 2 % p.a. in the next two years. The possibility of weaker economic performance remains large, however, as there is still much uncertainty related to the outlook for covid-19 and the oil markets.
Private consumption in Russia shrank sharply due to strict measures to control the spread of the coronavirus pandemic, sharp drop in incomes and increased unemployment. Consumption has recovered briskly in latest months as covid-related restrictions have been lifted. Fixed investment has declined and new fixed investment is supressed by uncertainty over economic trends and a massive drop in corporate profits. Russia has resorted to public sector support to blunt the impacts from the covid shock. Public sector spending should increase sharply this year, but next year the supportive effect of public spending will fade.
Russia's foreign trade has experienced a substantial contraction this year. The export volumes of certain key products, however, started to increase already in the spring, thanks in part to rapid recovery of the Chinese economy. Russian imports have been hurt by weak demand and ruble depreciation. Both exports and imports are expected to show modest growth next year with reviving demand domestically and globally.
BOFIT expects a modest recovery to begin next year: realised and forecast (f) figures
Sources: Rosstat and BOFIT Forecast for Russia.