Russia Blew Off a Smaller Chunk of Its Foot Than the Rest of the G20

After the initial madness by June Russia was quitely dismantling much of the mind virus self-suffocation and never fully brought it back

Didn’t quite go full in on the whole cattle-killing fad

Moscow’s targeted approach to supporting Russia’s economy during the pandemic has helped it bounce back from the crisis quicker than most of the industrialised world, says a deputy finance minister.

Although the Kremlin’s Rbs4tn ($54.3bn) Covid-19 support package amounted to a scant 4 per cent of gross domestic product, or less than a tenth of the assistance provided by Germany, Italy, and the US, Russia estimates the contraction in its GDP has slowed from 8 per cent year-on-year in the spring to 3.6 per cent in the third quarter of 2020, which placed it in the top five of G20 nations.

Russia benefited from a stimulus ordered by president Vladimir Putin before the virus struck, of which Rbs1.75tn has been spent this year.

“It’s a myth that Russia’s anti-crisis package was small,” Vladimir Kolychev said in an interview with the Financial Times. “The economy doesn’t care how you paint your expenditure. The important thing is that it increased.”

The country was able to make a quick recovery because targeted spending made it more efficient in handling the coronavirus crisis, Mr Kolychev added.

He said Russia had boosted government spending in total by 27 per cent this year, a figure Moscow claims is higher than that of any EU country.

“It’s obvious that Russia’s economy suffered less in the second quarter and recovered more quickly in the third quarter,” Mr Kolychev said. “That’s not just because of our support measures, but because the quarantine itself in Russia was structured differently than in Europe.”

Russia has recorded more Covid-19 cases than all but three countries worldwide, hitting a new daily record of 29,093 on Sunday.

Mr Putin, however, chose not to impose a nationwide lockdown in favour of delegating patchwork measures to local authorities who largely left Russia’s industry alone while shutting the consumer sector almost entirely.

The recovery plan eschewed tapping Russia’s $167bn cushion of savings from its oil and gas wealth to make direct payments to businesses and citizens in favour of tax holidays and loan guarantees.

Russia's economy suffered less in the second quarter of 2020

Elina Ribakova, deputy chief economist at the Institute of International Finance, said Russia’s “proactive fiscal support” in the wake of Covid-19 had been small. “Not surprising as Russia was facing a triple shock in 2021 from Covid, oil and risk of sanctions given the US election.”

She said the country would have “one of the smallest contractions globally due to the arithmetic of keeping lockdowns limited to keep economic damage under control”.

She added: “Unfortunately, it is not clear whether in Russia the healthcare system is capable of handling so many Covid cases.”

Mr Kolychev said Russia’s Rbs500bn in yearly payments to families with children — one of the few direct support measures in the coronavirus package — had helped consumer activity grow 3 to 5 per cent in the second quarter and continue to rise 1 to 2 per cent.

Moscow also passed several tax breaks for sectors including small businesses and the petrochemicals, including a cut from 20 to 3 per cent for IT businesses.

Mr Kolychev claimed the contraction in Russia’s GDP would have been negligible if not for the Opec+ deal of oil producers that limited production during the first wave of the pandemic.

“European countries haven’t grown their expenditure as quickly. The US, Canada, and Australia might have, but their programmes evidently were set up in a way that didn’t lead to quick growth in consumer spending. They recovered, but there hasn’t been a consumer boom,” he said.

“We wanted to use these temporary benefits to target growth in places where people had the most problems with their income. If you give everyone [money], including the rich, then the rich are hardly going to change their consumption habits.”

Mr Kolychev defended Russia’s decision not to spend the $167bn national wealth fund, squirrelled away from surplus oil and gas revenue, on economic stimulus payments, saying it had to be saved to “spread natural resource revenue fairly among the generations over time” rather than used as a way out of the crisis.

The finance ministry has used some of the fund to cover budget shortfalls during the pandemic, but has doubled its domestic borrowing to Rbs5tn rather than tapping its oil savings to boost spending.

Russia’s stimulus package one of the smallest in the G20

Mr Kolychev said: “When there’s a fall, the private sector is careful about spending and doesn’t want to go into debt, and the financial sector doesn’t want to give debt to the private sector because it knows the risks of default might be quite high. That creates a space for the state to borrow more without there being issues for the availability of debt financing for the private sector.”

Last month, Russia raised €2bn in eurobonds for the first time this year, taking advantage of favourable market conditions at a time when the Kremlin fears US president-elect Joe Biden’s administration could ramp up sanctions on Moscow next year.

Mr Kolychev said the country had drawn up plans to ease the impact of any future US sanctions that would bar foreigners from holding Russia debt. Those potential countermeasures include regulatory easing for Russian borrowers and a possible pause in future issuances to ease pressure on the secondary market.

But even though foreigners hold more than a third of Russia’s rouble bonds, Mr Kolychev said Moscow could replace them through local demand if required.

“Foreign holdings of Russia’s sovereign debt haven’t gone up much in cash terms in the last two years,” he said. “That essentially means that as far as debt is concerned, there isn’t that much reliance on foreign investors. Our domestic financial system can easily handle the existing level of borrowing.”

Source: Financial Times

  1. ke4ram says

    Russia and China are playing along allowing the West to destroy itself over the fake virus.

    Napoleon Maxim: Never interfere with an enemy while he is in the process of destroying himself.

    ke4ram’s Maxim: Always assist an enemy determined to destroy himself.

    1. disqus_3BrONUAJno says

      China is letting us spend ourselves to death with military buildup the same way that we made the USSR spend itself to death that way.

  2. cechas vodobenikov says

    as the US empire disintegrates into decadence and debt Russia increases reserves and rejects amerikan Covid cult fascism

    1. Garry Compton says

      Actually, Russia is going along with the WHO , to a certain extent and they have partnered with the Brit company Astra Zeneca , for a possible combined vaccine. It is being done with the Russian International wealth fund , with they use for investing in other countries, so they are thinking about making some money back from their sputnik V.
      I’m convinced that Russia was targeted thru Ukraine , when it comes to spreading the second heavy wave. It’s too obvious that all over the world, there seems to be the big Pharma, big Federal Gov. push or intentional spreading of the virus/flu. I’m in what I hope, is my final week of having it and at no time did I think I was going to croak – Im 70.

      1. cechas vodobenikov says

        false–no lockdowns or masks in any Russian cities required. only Covid fatalities matter–not unreliable pcr: Russia fewer than 40,000. Sputnik will not partner: expected to attract more revenue than all oil/gas/wheat exports in 2021, 50 nations have expressed interest and many already in contract. only sputnik can be stored at room temperature. all others require storage at below 0 Centigrade
        where I live—nothing closed, no masks except staff in restaurants

        1. Garry Compton says

          I live in Russia and I know the mask rules in my area [ Crimea } and they want masks in the hospitals, clinics, individual shops and in the market places – not in restaurants or outside walking around. Our Ukraine border is the problem – you are probably far enough away from the Neo Nazis. Haven’t heard that Gamaleya has stopped its contract with Astra Zeneca yet. Russia { Putin } has acknowledged that the PCR test is bogus , but they have teamed with Japan for another test – my doctor is the only one that verified that I have the virus – but I wouldn’t take any test – anyways. OO Dah Chee.

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