‘It’s a myth that Russia’s anti-crisis package was small’
The Kremlin considers that its strategy helped keep economic damage under control
Deputy Minister of Finance Vladimir Kolychev defended the Russian approach to countering with COVID-19 in an interview with the Financial Times. The official believes that targeted spending and selective measures helped Russia’s economy recover quicker than most of the industrialised world.
Moscow’s targeted approach to supporting Russia’s economy during the pandemic has helped it bounce back from the crisis quicker than most of the industrialised world, says The Financial Times citing Deputy Minister of Finance Vladimir Kolychev. “It’s a myth that Russia’s anti-crisis package was small,” said the official in the interview. “The economy doesn’t care how you paint your expenditure. The important thing is that it increased.”
The Kremlin enrolled a rather modest COVID-19 support package of 4 trillion rubles ($54,3 billion), which was less than a tenth of the funds allocated by Germany, Italy and the US. Nonetheless, the GDP contraction has slowed from 8% in the spring to 3,6% in the third quarter of 2020 placing Russia in the top five of G20 nations. According to Kolychev, such a quick recovery was possible thanks to targeted spending. He said that Russia’s economy suffered less in the second quarter and recovered more quickly in the third quarter not only due of the state support measures but also because the quarantine itself in Russia was structured differently than in Europe. When the second wave emerged, President Putin delegated powers to local authorities instead of imposing a nationwide lockdown.
Deputy Chief Economist at the Institute of International Finance Elina Ribakova said that Russia would have “one of the smallest contractions globally due to the arithmetic of keeping lockdowns limited to keep economic damage under control”. However, she added that it was not clear whether the national healthcare system was capable of handling so many COVID-19 cases.
According to Kolychev, Russia’s payments to families with children had helped consumer activity grow by 3-5% in the second quarter. “We wanted to use these temporary benefits to target growth in places where people had the most problems with their income. If you give everyone [money], including the rich, then the rich are hardly going to change their consumption habits.” He also said that European countries haven’t grown their expenditure as quickly.
Russia’s $167-billion National Wealth Fund was not used to make direct payments to businesses and citizens. Although the Ministry of Finance has tapped the fund to cover budget shortfalls during the pandemic, it has also doubled its external borrowing to boost spending. Kolychev said that the money cushion had to be saved to “spread natural resource revenue fairly among the generations over time” rather than used as a way out of the crisis.