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 economy ministry said on Thursday.
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.
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.
“The situation with the coronavirus will have long-term structural consequences,” Economy Minister Maxim Reshetnikov said.
Russia’s tally of coronavirus cases, the world’s second highest, rose to 317,554 on Thursday.
The ministry now expects the price of Russian Urals crude URL-E to average $31.10 per barrel this year, down from the $57.70 it predicted just a few months ago.
Urals crude, which traded at around $35.80 per barrel late on Thursday, will only rise to around $40 by the end of 2021, under pressure from high global inventories, 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.
Household’ 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 rouble is now forecast to average 72.6 to the dollar this year, rather than the 63.9 predicted by the ministry in February, and to weaken further to 74.7 in 2021. On Thursday, it traded around 71 to the dollar.