Coronavirus impact on Russian economy still uncertain
Although the overall impact of the coronavirus on the Russian economy is currently rather modest, the epidemic can pose considerable risks in case it widens. In addition to a commodity and capital market slowdown, the virus is hitting the tourism industry due to a decreased number of Chinese tourists, which were among the top tourist groups in Russia before the outbreak.
The effect of the coronavirus on the Russian market is subdued so far, says bneIntelliNews citing a report of the Bank of Finland Institute for Economies in Transition (BOFIT). The potential impact on the Russian economy is difficult to evaluate because of uncertainty about the duration and extent of the coronavirus epidemic. At the moment, the overall economic impact is likely to remain low. “However, if the epidemic widens, it poses significant risks to Russia’s economic development amidst deteriorating global economic conditions,” reads the report.
So far, the Russian economy has felt mostly indirect effects of the coronavirus. Since the beginning of 2020, the ruble has lost about 4% of its value against the dollar. The country’s benchmark RTS stock index is now down by around 1% compared to the start of the year after gaining over 10% in the first two weeks. Commodity markets were hit harder, BOFIT notes. The price of Urals oil has dropped by 20% since the beginning of the year, and prices of many metals have also fallen. Oil, natural gas and metal exports accounted for approximately 17% of Russia’s GDP last year. The country’s 2020 budget is designed to show surplus if Urals stays above $42 per barrel.
Measures to prevent the spread of the coronavirus in Russia include restricting passenger traffic at Sino-Russian border crossings, limiting flights between the two countries and suspending visa-free travel for Chinese tourists, whose number has significantly increased in recent years. According to bneIntelliNews, Russia’s tourism sector is already feeling the effects of the virus. The Association of Tour Operators of Russia considers that the industry can lose $40-50 million a month if Chinese group tours scheduled for February and March are cancelled. In 2019, Russia’s total tourism earnings amounted to $11 billion, or 0,6% of GDP, making it an important hard currency earner for the country. To boost tourism further, the Kremlin has already started easing the visa regime and introducing short-term tourist visas that can be applied for online.
The coronavirus epidemic has also complicated component deliveries to Russian car factories and disrupted retail chain supplies of fruits and vegetables of Chinese origin.