How the coronavirus will affect the Russian economy

2024 Author: James Gerald | [email protected]. Last modified: 2023-12-17 14:00

The negative impact of the coronavirus pandemic on the global economy is predicted in numerous forecasts by economic experts published in the media. However, the opinions of experts on how this will affect Russia are ambiguous and contradictory.

World Economy and SARS-CoV-2

Forecasts of stagnation and recession in the global economy have been published with enviable regularity in the media since 2017. The first designated date of the financial apocalypse was 2018, and the basis for it was the statement about the cyclical alternation of periods of development with periods of recession.

Since the last situation of an acute financial crisis was in 2008, the fall was planned for 2018. When the forecasts of the pessimists did not find much confirmation, the period of the cycle was declared not 10, but 12 years, but the year of the new global crisis - 2020.

Back at the end of 2019, when the coronavirus was not a global pandemic, extensive forecasts of negative processes expected in financial structures and individual states were printed. Since the beginning of the SARS-CoV-2 epidemic in China, negative consequences for the economy of this country have been predicted:

• decrease in consumption;
• drop in production;
• restrictions on the movement of people and goods;
• uncertainty of the situation;
• falling stocks on stock exchanges.

At that time, attention was not focused on how this would affect many developed countries. Meanwhile:

• the decline in consumption by China hit the tourism market hard, since for many countries they were the main consumers of services;
• restriction of movements caused a drop in demand for fuel, since the PRC accounts for a significant percentage of the oil sold;
• European countries and the United States suffered from a drop in the volume of sales of Chinese goods in the domestic market, products that were ordered from factories and factories in the PRC;
• the fall in shares on the stock exchanges was inevitable for large American companies, which warned of the potential for no profit.

At first, the coronavirus was positioned as a factor that could permanently reduce China to the category of countries with a weak economy due to internal factors. As well as restrictions on the supply of goods, the lack of tourists and investors, the colossal costs of fighting the raging epidemic. Then they started talking about how the Chinese epidemic will affect Russia.

A necessary condition for the country's default and a catastrophic economic decline was called a weak China, the absence of a large trading partner that buys oil and supplies goods. As a result, a total devaluation of the Russian ruble, to some extent pegged to oil prices.

Opinion about panDemia

SARS-CoV-2 can affect not only negatively, but also positively on the country's economy. It is impossible to say exactly how events will develop, but you can already see some positive moments:

1. Opening of a window of opportunity for the domestic industry caused by the lack of supplies of some goods from China. A vast domestic market has been freed up, which needs to be filled with essential goods and products.
2. Economic change driven by harsh realities. Thus, the negative and decreasing influence of natural monopolies on the Russian economy will be limited.
3. A decrease in the value of Russia's assets will also take place, but much less, since they are still undervalued, and the Russian Federation has very strong macro indicators.

As for the impact on the movement of goods and services provided by Russia, they were significantly reduced by the imposed sanctions, and in some Western countries they were reduced to minimal indicators. The Russian Federation was forced to adapt to forced isolation and now has the advantages it gained from a difficult situation.

The realities of the end of March 2020

It is still difficult to say what the final result of the economic consequences will be, how the global pandemic will affect the Russian economy. However, despite the panic in the opposition press, experts believe they will not be so disastrous.

Sokolov, who previously acted as an expert from Sovcombank, expressed confidence that the market pressure on the Russian financial system will subside as the situation with the coronavirus becomes clearer. Now it turned out that the Russian Federation is able not only to meet the needs of the domestic market for personal protective equipment and testing, but also to transfer them to other countries.

This made it possible to avoid purchases abroad and develop a vaccine. Russia recently announced the creation of a cure for the coronavirus. How all these events against the background of events in Italy and the United States will affect the country's economy is easy to guess.

The tourism industry, as in many countries, turned out to be at a zero level, however, according to experts, this will not give a tendency towards a decrease in Russia's GDP. Perhaps this is offset by the expansion of the domestic market and the processes of import substitution.

As for the low cost of oil, Iran's intention to partially reduce production volumes amid the epidemic, and large transactions between Russia and China will be a clear answer to how the coronavirus will affect the economy of the gas station country. So far, the US shale oil production has tangible consequences.

Summarize

Experts' opinions are mixed:

1. Pessimists are confident that the global community is catastrophic.
2. Russian experts see positive aspects for the country's economy.
3. Previously negative moments began to have positive dynamics.
4. No final conclusions can be drawn.