The conservative scenario of Russia’s macroeconomic outlook suggests GDP growth of 2.7% in 2021, and 2.9% in 2022, with further stabilization at the level around 2.5% amid persisting lower business activity in a number of sectors, according to the country’s social and economic development outlook for 2021 and the planned period of 2022 and 2023 presented by the Economic Development Ministry.
According to the base case scenario of the outlook, Russia’s GDP will contract by 3.9% in 2020, and grow by 3.3% in 2021, 3.4% in 2022, and by 3% in 2023.
“From the viewpoint of domestic conditions, the conservative scenario suggests lower business activity persisting long in the sectors, whose activities were restricted in response to the novel coronavirus infection spread. Meanwhile structural changes in consumer demand, both global and inside Russia, will slow down the recovery of such sectors as entertainment and leisure, tourism, personalized consumer services,” according to the outlook.
The conservative scenario “is based on the assumption that the sanitary and epidemiological situation in the world will become less favorable, a protracted recovery of the global economy and structural slowdown of its growth rates in the mid-term due to the aftermath of the novel coronavirus infection spread.” The base case option depicts the most probable scenario of Russia’s economic development considering the expected external environment and the economic policy measures being taken.
“In the conservative option of the outlook the global economic recession triggered by restrictions imposed in the biggest countries will deepen the structural problems accumulated before the pandemic,” the ministry emphasized.
Among them are a high debt burden in developed states and a number of emerging economies, a slowdown of global trade growth due to mounting trade frictions between the largest countries, slow growth of labor efficiency, an increase of global inequality. “Amid this environment global economy will be recovering slower than suggested by the base case scenario,” the outlook said.
The conservative option of the macroeconomic outlook also suggests oil prices in the range of $43-45 per barrel in the mid-term amid weak energy demand.
“Weak demand for energy resources will put additional pressure on global crude oil prices. That said, the OPEC+ agreement will continue influencing the oil market, the same as output reduction in the US and the countries with high production costs. In those conditions, oil prices are projected in the range of $43-45 per barrel in the mid-term in the conservative scenario, which is lower than base-case parameters,” the ministry explained.
Moreover, the accumulated corporate losses in the conservative scenario will restrain the recovery of profits and, as a result, of investment activity. “Amid this environment growth rates of fixed investment are projected at the level of 3.7% in 2021 and around 4.5% in the mid-term,” according to the outlook.
“Considering more moderate, than in the base case scenario, economic growth rates, growth rates of real disposable income of households in the conservative option are expected in the range of 1.6-1.9% in the mid-term, which will have a restraining effect on consumer demand,” Russia’s Economic Development Ministry said.
It estimates the growth of retail trade and charged services to consumers in 2021 in the conservative scenario at 4.5% and 5.6%, respectively, whereas in 2022-2023 both will continue growth by 2-2.3%.