In its article, the Invest Foresight business magazine published an economic forecast which Alexei Vedev, Head of the Financial Studies Department, Gaidar Institute presented at the meeting of the FBK Economic Club dedicated to the topic: “Russia without Oil: Prescriptions for Survival.”
“The Russian Economy will collapse this year, while its recovery to the level of the year 2019 may take at least three years,” Alexei Vedev predicts.  

“It is obviously an L-shape crisis; the economy will fall dramatically this year, primarily in Q2, and then will recover smoothly. But at present it is crucially important to draw the line between anti-crisis  instruments aimed at fighting the coronavirus epidemic and its implications and a set of measures for further development of the economy,” Alexei Vedev explained.

In Alexei Vedev’s opinion, “one can currently see the ill-defined debates in methodological terms both between experts and over the government’s anti-crisis plan. It is expected both to exit from the crisis and simultaneously facilitate growth, but these are two different objectives.  The first one is to exist from the crisis and the coronavirus epidemic and recover, while the other objective is to facilitate economic growth.

“At the moment, there is no clear-cut comprehension which measures are introduced on a temporary basis for fighting the crisis and facilitating the recovery of the economy because of the coronavirus and which measures are going to be used in the mid-term prospect. But this is crucially important for underpinning the business climate in terms of economic motivation of investment activities,” the expert notes.

Alexei Vedev believes that money injections in the economy will help overcome the crisis.

“I think that public moneys should be paid for it; the source of such funds is the money emission, the National Welfare Fund and the internal debt,” Alexei Vedev specified. 

Also, Alexei Vedev reminded that Russia was confronted with the decline of economic growth rates as early as November 2019. By Alexei Vedev’s estimate, the leading profile government departments and the Russian Central Bank have changed their views on numerous issues.

“The Russian Central Bank is speaking sooner about the zero interest rate, while the Ministry of Finance has completely modified its budget policy; the budget deficit has become a norm and it is correct. It means the government is giving more to the economy than is taking from it,” Alexei Vedev notes.

Alexei Vedev stressed the importance of structural economic reforms for facilitating high economic growth rates; without such reforms economic growth rates of 1.5-1.7% are highly unlikely. 

“Starting from 2011, it has been seen from practice that either the economy will grow at the rate of less than 1%  and, consequently, all illusions of economic growth rates above the average global ones should be given up or the economic model needs to be changed, “ Alexei Vedev believes.