Russian economy ministry predicts GDP to contract in 2020

Russian economy ministry predicts GDP to contract in 2020

Russia’s economy is on track to shrink by 5% in 2020 and the rouble will remain weak as the novel coronavirus pandemic and low oil prices hit home, the Russian ministry of economic development said.

"The situation with the coronavirus will have long-term structural consequences," Economy Minister Maxim Reshetnikov said.

Industrial output in 2020 is forecast to fall 5.4%, while capital investment is set to contract by 12%. The previous set of forecasts envisaged increases of 2.3% and 4.9% respectively.

Households’ real disposable incomes are projected to shrink by 3.8%, compared to the 1.9% growth seen earlier. Unemployment is seen at 5.7%, up from 4.5% predicted earlier, an increase that reinforces concern about Russia’s worsening living standards.

The ministry was revising its outlook for the next three years, presenting a drastic change to this year’s prospects compared with its previous forecasts from February, before the COVID-19 outbreak hit Russia, Reuters reported.

In February, before a global slump in the price of oil, Russia’s key export, and nationwide lockdowns, it had projected growth of 1.9% for this year. It now expects a 2.8% rebound in 2021, after this year’s slump.