Russia Economics - Economic Challenges in 2020: A Temporary Dip in Consumption, Exports and Perhaps Investment

Both the global economy and Russia face the threat of a downturn in economic activity in the wake of the coronavirus outbreak and the global response to it. In Russia, the response included mandating 14 days under quarantine to those crossing the border from certain countries. In addition, many students and employees have made the shift online. At this point it is impossible to properly estimate the potential scale of the economic impact, especially since we do not yet know how long some of the measures restricting people's movement will remain in place. In this report, we look into which industries are likely to be the hardest hit. Almost all countries across the globe, including Russia, have announced economic support to cushion the impact of the global pandemic. It seems that countries have not been skimping either, which we believe is certainly wise. The main goal now, at least from an economic perspective, is to prevent a crisis and limit the number of businesses and entrepreneurs that will go bankrupt. If countries succeed in these efforts, people will begin to return to life as usual, and the rebound in consumption should be quite brisk. In the chart below, we show four scenarios for consumption in 2Q20 involving either a 5% or 10% Q-o-Q drop in consumption and then a recovery in either 3Q20 (the "V" scenarios) or 4Q20 ("U"). All of these scenarios are based on the assumptions that the virus will be contained in the next three to six months and that the government's economic support will prove effective.