INTERVIEW: World Bank upgrades Russia 2020 GDP fall outlook to 4%

MOSCOW, Dec 16 (PRIME) -- The World Bank has upgraded its forecast for contraction of Russia’s gross domestic product (GDP) in 2020 to 4% from 5%, and expects the GDP to rise 2.6% in 2021, Lead Economist for Russia Apurva Sanghi told PRIME on Wednesday.

“Of course, it was a bad year for everyone in the world, but if we try to find something good and look at figures, we can say that the situation is slightly better than what we forecast in September. In September, we expected a 5% fall of the Russian economy, now we expect a contraction of 4%. I suppose that the third quarter was a pleasant surprise for the economists as it outperformed all forecasts,” he said.

The key sectors like finance, agriculture, telecommunications as well as public administration made this improvement possible. The new OPEC+ agreements also helped stabilize the oil prices, meaning that the current situation is better than what was in April–June, he said.

The World Bank expects Russia’s gross domestic product to rise by 2.6% in 2021 and by 3% in 2022 if the anti-coronavirus vaccine to be used for mass vaccination is safe and efficient. The vaccine should raise the confidence of consumers and companies and become a growth driver. Exports will start to recover in 2021 together with the global economy, and it would be another driver of the Russian economy, he said.

But if the number of new COVID-19 cases rows, recovery of the Russian economy may slow down to 0.6% in 2021 and to 2.8% in 2022.

Improvement of the economy should improve unemployment. The World Bank does not forecast unemployment, but it should get better, Sanghi said.

Renaud Seligmann, World Bank’s country director for Russia, told PRIME that mass vaccination will help Russia reboot the economy, but it is only one part of a large-scale plan, the country needs structural changes in order to ensure sustainable future.

Besides saving lives, improving the quality of life, and lifting of restrictions for the households and businesses, “vaccination should become an important but not the only measure healthcare takes as a whole. If we take a more global look, vaccination is a key part of the economic recovery package. The state has to define what challenges need immediate reaction, like issues of long-term growth, demography, climate change, reduction of carbon emissions, and digitalization,” he said.

Russia has to change structurally in its approaches to demography, climate, and digitalization to ensure sustainable future. The government should raise workforce productivity, improve the quality of human capital through higher and more affordable education, and fight climate change, Seligmann said.

The current economic support measures of the Russian authorities allowed the country to avoid a rise in poverty.

“The fact that the share of the poor population forecasted for 2020 is currently at the level or even slightly below the level forecast before the start of the pandemic means that the measures achieved their goal. Assuming the forecast that Russia’s GDP fall by 4% in 2020, up to 14.2% of the country’s population may find themselves below the officially defined poverty line, while compensatory measures make it contract to 11.6%,” he said.

The World Bank also said in a report that it expects the average annual oil price to rise to U.S. $44 per barrel in 2021 from $41 in 2020, and to grow to $50 per barrel in 2022.

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