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Russia’s Economy Entering 2-Year-Long Recession Amid Oil Prices Fall And Coronavirus Shutdown: Report

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Russia's Economy Entering 2-Year-Long Recession Amid Oil Prices Fall And Coronavirus Shutdown: Report

IMAGE: TASS/Eugeny Sofiychuk

The Russian economy has been suffering from the coronavirus shutdown and the drammatic fall of oil prices following the breakdown of the OPEC+ oil production pact and Saudi Arabia’s agressive actions on the oil market. The recent developments have shocked traders around the world and resulted in sharp volatility on the Russian stock markets leading to the fall of the value of the ruble.

Russia's Economy Entering 2-Year-Long Recession Amid Oil Prices Fall And Coronavirus Shutdown: Report

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In an address to the nation on April 2, President Vladimir Putin extended the economy shutdown (initially planned for March  30-April 5), ordering non-essential businesses to stay closed until the end of April. In fact, the government gave workers a month-long paid holiday and ordered ‘non-essential businesses’ to pay for this. The announcement came amid a wave of lockdowns across Russia imposed by local authorities that have already led to the administrative self-isloation of many regions.

On April 1, the Center for Macroeconomic Analysis and Short-Range Forecasting released a report providing a look at the expected consequences of the current situation. The main author of the analytical report is Dmitry Belousov, the brother of First Deputy Prime Minister Andrei Belousov. The report says that even in the non-crisis scenario based on a large-scale anti-crisis program, the Russian economy “is still likely to be faced with a high probability of a two-year recession,” corresponding to the length of the global economic downturn.

The analytical center says that the probability of this ‘constructive scenario’ involving the active state response to the crisis is 55–57%. The fall in the GDP will be kept at 2.3–2.5% in 2020 and 0.5–0.8% in 2021. Therefore, in the next two years, the Russian economy will decline by 2.8–3.3%. After the end of the crisis in 2022, the economy will return to slow growth: 0.6–1%. However, if the government does not employ active measures to contain the damage to the economy, the recession may turn out to be even deeper. If the government limits its efforts to a stabilizing policy only, in 2020 the GDP may fall by 3–3.3%, in 2021 – by 0.8–1%. According to the report, in both scenarios, it will be be difficult to avoid a jump in poverty or unemployment.

It should be noted that the report was released before a statement by US President Donald Trump claiming that Saudi Arabia and Russia will reach a new oil deal soon.

“Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!” Turmp wrote on Twitter on April 2.

The Trump statement and the following reactions by Saudi and Russian officials led to a temporary and limited growth in oil prices. However, by April 5, it appeared that the OPEC+ meeting planned for April 6 was rescheduled for April 9 indicating the contradictions among the sides involved. In particular, Russia says that US oil producers also must be included in the production cut off deal. Therefore, the energy market still remains unstable.

Russia's Economy Entering 2-Year-Long Recession Amid Oil Prices Fall And Coronavirus Shutdown: Report

Click to see the full-size image

The complicated economic situation appears to be also affected by political developments inside Russia. The coronavirus shutdown take place just before the expected nationwide referendum on the constitutional reform (widely criticized by the neo-liberal opposition, affilated with the West).

Modern “liberalism” (often called “neo-liberalism”) is the ideology of serving to global financial monopolies and market speculators in general. The goal of such “liberals” is to increase their personal level of consumption with the minimal possible intellectual and physical work, using the margin simplification of modern communications and IT technologies, for satisfying their selfish, mainly bodily, desires covering them under the guise of post-modern sophistry. Thus, they swallow public resources undermining the steadily development of the humanity.

It’s expected that after the end of the shutdown the Russian government will return to the process of the constitutional reform. The neo-liberal opposition and other destructive forces affilated with the West will likely seize the opportunity to launch a new destbilization campaign in the country.

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