Russian Economic Prospects: Moderately Optimistic Forecasts

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From April 6–7, the HSE Centre of Development Institute conducted a special survey among professional forecasters on the Russian economy’s prospects for 2020-2021. The experts expect a decline this year due to the coronavirus pandemic and low oil prices this year, but predict that the losses will be fully recouped in 2021.

Nineteen experts from Russia and other countries were surveyed by the Centre of Development Institute. The Institute says that after several years of sluggish development for Russia’s economy, when forecasters’ consensus hardly changed from survey to survey, the Russian and the global economies have changed dramatically over the last six to eight weeks.

These changes are mainly due to the Covid-19 pandemic and the almost universal introduction of lockdowns of varying levels of strictness, which have led to a huge supply shock. As compared to the previous survey, which was held in mid-February, the GDP forecast for 2020 has decreased: instead of a moderate 1.8% increase, now forecasters predict a more or less moderate decline of 2%.

Analysts expect the average annual price of Urals oil to be $34.30 per barrel this year as compared to $59.60 per barrel in the February survey. The steep fall of oil prices has led to a considerable increase in devaluation expectations, but most forecasters agree that the worst is already behind us, and that by the end of the year, the rouble will slightly rally to 74.7 roubles per USD.

Efforts to curb inflation will be largely successful, but it will temporarily exceed the Bank of Russia’s target level of 4%. Experts expect that inflation will be 5.3% by the end of 2020, and 3.8% by the end of 2021. Most of the experts also predict that Bank of Russia will not manipulate its key rate, which will not exceed 6%.

Sergey Smirnov of the Centre of Development Institute characterizes the 2021 forecast as ‘moderately optimistic’. GDP growth will be 2.3%, inflation will be below 4%, and oil prices will be about $45–50 per barrel. Only two of the 19 experts expect the recession to last for two years, while the others expect growth in 2021. One of the experts believes that 2020 will see no decline, and the Russian GDP will grow by 0.1%.

The biggest decline is expected in the second quarter of 2020, after which the downturn will gradually decrease. The first quarter of visible growth will be in the second quarter of 2021, when the base effect will play a crucial role. Most of the forecasters believe that the economic decline will last for three or four quarters; only two of them believe that it will take one or two quarters.

Complete consensus forecast by the Centre of Development Institute (in Russian)