World Bank sees Russian economy to contract by 6% in 2020
The experts also warn that the COVID-19 pandemic is affecting Russian education
Russian GDP is expected to lose up to 6% in 2020, which seems almost inevitable given sharp contraction of most economic sectors. Nonetheless, the economy may move into positive territory next year in the absence of a second pandemic wave.
Russia’s 2020 GDP growth is projected to contract by 6% with a moderate recovery expected in 2021-2022, says Modern Diplomacy citing the World Bank’s latest Russia Economic Report. Between January and May 2020, crude oil prices dropped by 53% depressing the country’s economy. Thus, most economic sectors have recently shown negative growth. In April and May 2020, mineral-resource extraction decreased by 8,4% and manufacturing — by 8,6%. The transport sector lost 7,7% in the same period driven by falling trade volumes since the beginning of the year. Overall household consumption is expected to shrink by 4,9% this year. According to the study, sectors that were not initially affected, like agriculture, can be impacted in later stages if disruptions in migrant labour availability, internal logistics, international trade or financial conditions make resuming full production difficult.
“There are immediate impacts of the pandemic-driven recession, such as the steep rise in unemployment, the drop in real wages, reduced fiscal revenues and a weakened banking sector,” explains the World Bank’s Lead Economist for Russia Apurva Sanghi. Nonetheless, he remarks that “the prudent macro-fiscal policies and accumulated buffers have allowed the authorities to implement effective stabilisation measures”. If implemented adequately, these measures may partly restrain the crisis-induced increase in poverty. However, the report warns of possible deeper longer-term consequences such as worsening of chronic health conditions, permanent job and skill losses and small-business bankruptcies.
In the absence of a second pandemic wave, a moderate recovery is likely to be registered next year. The World Bank assumes that GDP growth can move into positive territory to 2,7% in 2021 and 3,1% in 2022.
The report pays special attention to the impact of the COVID-19 pandemic on the Russian education system. School closures may result in learning loss of more than one-third of a Russian school year causing a decline in the Programme for International Student Assessment points. According to the World Bank’s Country Director for Russia Renaud Seligmann, these losses are higher than those estimated for OECD and EU countries.
However, the current response to the COVID-19 crisis may also be an opportunity to tackle structural imbalances in the Russian education system, notes the report. The situation can speed up needed reforms, such as reducing the digital divide to ensure that all students and teachers benefit from learning platforms, improving connectivity in lagging regions, producing a clear national strategy for internationalisation of higher education and introducing independent impact assessment and quality assurance mechanisms.