UPDATE: Kudrin says Russia’s GDP to fall around 5% in 2020

(Adds comments in paragraphs 5–7)

MOSCOW, Apr 13 (PRIME) -- Russia’s gross domestic product (GDP) will fall nearly 5% this year, the Audit Chamber’s head Alexei Kudrin told RBC TV channel on Monday.

“Today, when we see that our country has been touched by quarantine as well and has been in it for at least a month, we don’t know yet, it may be necessary to implement more quarantine or some sectors will still be in a very difficult situation, or certain regions. I think that, as my last estimate was a drop between 3% and 5%... I already think it will be closer to a 5% decline. I repeat – it’s very difficult to give rigorous estimates,” Kudrin said.

The crisis in Russia amid the spread of coronavirus could spread to the banking system in three to six months, and banks may need capital injection in this case, Kudrin said.

“We rather saw a limitation of supply and demand. So far, the crisis stage is such that we need to think first of all about people. But if our economy does not restart, if our companies shrink as a result, in two months all the bad debts of these companies, which are unable to continue working, and the problems will spread to banks,” Kudrin said.

Russia may need an additional up to 4 trillion rubles this year to fulfill all budget obligations and support the economy, while another 2-3 trillion rubles should be allocated to support business amid coronavirus, Kudrin said.

“The federal government estimates the loss of both oil and non-oil revenues at approximately 3 trillion rubles to 4 trillion rubles in different scenarios,” he said.

“It is necessary to have 4 trillion (rubles) in stock to replace the shortfall in income and fully fulfill all obligations, both at the federal level, both in the Pension Fund and in general for Russian regions.”

The Finance Ministry should raise borrowings in 2020 for additional support of the economy amid coronavirus, he said.

“Our country has one of the smallest state debts, and we can borrow on the markets and thereby increase this amount of support,” he said.

Russia may borrow 2–4 trillion rubles on the domestic market and the same on the foreign market, he added.

The number of unemployed in Russia will temporarily grow from 2.5 million people to 8 million people in 2020, Kudrin said.

“According to the forecast of this crisis, which has just begun, the number of unemployed in Russia will increase from 2.5 million people to 8 million people for a certain period, perhaps by the end of the year.”

“But then, when there is a restart, a gradual increase in demand, public confidence in consumption, then, of course, the number of unemployed will immediately become less,” he added.

The level of the minimum wage and the size of unemployment benefits should be temporarily raised for this difficult period, Kudrin said.

He also said that the payroll tax should be reduced to 22% for all Russian companies.

“Today, the payroll tax was reduced to 15% from 30% for small and medium-sized businesses. This is a very expected measure, finally it came. In general, I assumed that, most likely, it is necessary to reduce the payroll tax for all companies in the country, but to moderate 22%. It would be feasible for the budget system and it would mean a reduction of the burden approximately equal to the value-added tax (VAT) increase by 2 percentage points,” he said.

(73.7515 rubles – U.S. $1)

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