Russian government to present economic recovery plan

The Russian government will today present to President Vladimir Putin a plan designed to stimulate both national and regional economic

Russian oil well in Siberia

Photo: Yegor Aleyev/TASS

The Russian government will today present to President Vladimir Putin a plan designed to stimulate both national and regional economic recovery.

The plan will encompass FY 2020-2021 and is expected to encourage investment and income growth as well as support for small and medium-sized businesses.

Due to the pandemic, Russia’s GDP growth has slowed significantly. The country’s budget revenue for 2020 is expected to fall over $50 billion short of pre-crisis expectations, pushing it into a 4% budget deficit.

The shortfall can be largely attributed to the decline in the price of oil, which comprises around 60% of Russia’s exports. Due to a decline in transportation from worldwide lockdown measures, oil prices have nearly halved since January. This deficit will be exacerbated in July when Russia increases oil production cuts by two million barrels per day in line with an OPEC+ deal signed in April.

The OPEC+ agreement will make it difficult for the Kremlin to prop up regional economies in rural areas like Western Siberia, which are highly dependent on oil revenues. While this could present Putin with an opportunity to encourage economic restructuring away from the “dead horse” of oil, such a transition would be unpopular among Russia’s oligarch elite and is unlikely to take place. Instead, expect a modest expansionary policy funded by further withdrawals from the country’s sovereign wealth fund in order to revive growth and to attract foreign investment in the medium run.

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