Research Article: 2021 Vol: 20 Issue: 2S
Yuri V. Kozyr, Institute of the Russian Academy of Sciences
Oksana V. Teveleva, Institute of the Russian Academy of Sciences
Lockdown in Russia, Economy during the Pandemic, Social Consequences of the Lockdown, Assessment of Economic losses from the lockdown, Forced Downtime of the Econ-omy
In 2020, Russia's economy, like the economies of the rest of the world, faces an unprece-dented challenge from the coronavirus epidemic. With the lockdown, the global economic reces-sion, falling oil prices and related disruptions, the economy is likely to face a prolonged period of slowing growth. Whether the spring and summer lockdown was justified remains to be seen. Equally, the severity of the economic consequences remains to be assessed. In any case, the shock situation could not but affect the economic indicators, as well as the quality of life of the majority of Russians.
In 2020, Russia's economy was affected by two negative factors simultaneously - the de-cline in world oil prices and the need to contain the spread of coronavirus infection. Strict measures in connection with the unfavorable epidemiological situation were taken in March - a lockdown was declared in Russia. And from the beginning of June, enterprises and organizations began to gradually resume their activities. However, due to the fact that the number of people affected by the disease continued to grow in Russia and worldwide, we cannot speak about re-covery even in January 2021 - many countries still impose restrictive measures (activities of many economic entities have been stopped, trade borders are closed and the movement of people between countries is prohibited). The economic consequences of these measures for most coun-tries are not yet known, but are expected to be severe in the medium and long term. As of De-cember 2020, it is not clear how soon we should expect improvements, or if we should expect them at all. The International Monetary Fund's (hereafter, the IMF) latest economic forecast re-ports that the global economy is projected to contract by 4.4 percent in 2020. (International Monetary Fund, 2020), much worse than during the 2008-2009 financial crisis, when global gross domestic product (hereafter, GDP) contracted by 2.5 percent. The decline in real world trade in 2020 is projected at 10.4 percent (International Monetary Fund, 2020). In 2008-2009, this figure declined by 12 percent.
According to the IMF forecast in October 2020, with a 4.4 percent drop in world GDP, Russian GDP will fall by 4.1 percent (International Monetary Fund, 2020). Although it is too early to assess the losses of Russia due to the lockdown at present, an idea of the losses incurred will make it possible to make balanced decisions to close the country in the case of the third or subsequent waves of the epidemic.
So far, there is no clear understanding of who to listen to, epidemiologists or economists, since quarantine leads to a decline in the economy, and the absence of quarantine and strict measures leads to the uncontrolled spread of the virus. The effect of vaccines is not yet evident, nor is the virus' ability to further mutate and re-infect those already infected. At the same time, there is hope for a normalization of the situation in the future.
Chronicle of Events
March 30, 2020 can be considered the official start date of the lockdown in Russia. On March 25, 2020 the President of the Russia declared the period from March 30 to April 3 inclu-sive as a non-working day in his televised address to the citizens in order to control the spread of the epidemic. Exceptions were provided only for a very limited category of persons. Since March 30, Russia completely closed its borders to both Russians and foreign nationals. Fitness clubs, swimming pools, water parks and other sports facilities were temporarily closed in Mos-cow on March 21, all public events of over 50 people were cancelled, and concert halls, muse-ums and other cultural institutions were closed. Also, classes at schools and colleges in Moscow were canceled until April 12, 2020. On March 30, Prime Minister Mikhail Mishustin asked the authorities of the subjects of the Russian Federation to consider the measures introduced in Mos-cow and Moscow region in order to study the possibility of introducing a similar regime. As a result, the self-isolation regime has been in effect in 26 regions since March 31. As in Moscow, it was allowed to leave the house in case of a medical emergency; in case of an immediate threat to life and health; for trips to work (for those who are required to be present); for shopping in the nearest store or pharmacy; for carrying out garbage; for walking pets near the house - no further than 100 meters from the place of residence.
Speaking on April 2, President Putin allowed regional authorities to choose their own measures to combat the coronavirus. As a result, as of the evening of April 4, restrictions had not been introduced in only three regions: Nenets Autonomous District, Tver and Yaroslavl Regions. Significant regime toughening occurred in Moscow since April 13, when they gradually began to introduce passes. In addition, since April 13, in the capital temporarily stopped the work of al-most all businesses and organizations with a few exceptions (public utilities, pharmacies and convenience stores).
The practice of Moscow soon spread to the regions. A similar algorithm was implement-ed in the process of lifting restrictions. On May 11, 2020, while addressing the Russians, Vladi-mir Putin said that the period of "non-working days" in Russia will end on May 12, but the exit from the regime will be gradual - all mass events are still prohibited, restrictions remain for citi-zens over 65 and those suffering from chronic diseases. It will be up to each region to decide how the restrictions will be lifted. Regional leaders have the right to suspend local businesses if sanitary measures cannot be ensured there.
On June 4 the government of Moscow announced that most restrictions in Moscow will be removed by July 1. Since June 9, self-isolation, the walking schedule for citizens and the permit regime were completely abolished in the capital. Cafes, restaurants, fitness centers, hotels, museums, industrial enterprises, non-food stores and service organizations resumed their work a little later, but under conditions of increased sanitary requirements. Around the same period, the regions also lifted restrictions, despite the fact that the threat of the spread of the epidemic re-mained high. Sergei Sobyanin (mayor of Moscow) explained the actions of the mayor's office and the Russian Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing (Rospotrebnadzor) by the creation of a sufficient number of hospital beds and the high preparedness of hospitals and polyclinics to cope with the growing number of infected citi-zens.
Thus, the lockdown lasted only 9 weeks. However, many of the restrictions were extend-ed for several more weeks - at least until July 1.
Vladimir Putin, in his address to citizens on March 25, 2020, voiced a number of measures aimed at supporting the economy in the face of the epidemic:
- Credit vacations on mortgages and consumer loans for citizens if their incomes fall by 30 percent or more;
- Financial support for families with children (lump sum payments of 5 thousand rubles for each child under 3 years old and 10 thousand rubles for each child from 3 to 15 years old)
- Payments for sick leave to citizens in the amount of not less than one minimum wage per month (minimum labor wage=12,130 rubles or $164 a month).
In order to support small and medium-sized businesses, the president proposed granting companies a deferral of taxes, except VAT, reducing the amount of insurance premiums for small and medium-sized businesses on a long-term basis, as well as introducing a moratorium for six months on filing for bankruptcy.
Furthermore, the government approved a list of support measures for organizations and individual entrepreneurs engaged in the areas most affected by the spread of coronavirus. The list of affected industries included a total of nine sectors, including catering, hospitality, air transpor-tation, enterprises of additional education, culture and sports, businesses, consumer services. Later, the list of affected industries expanded to eleven. The list of measures included:
- An extension of the deadline for paying taxes, fees and insurance premiums from three to six months for small and medium-sized businesses;
- A deferral of tax audits until May 31, 2020;
- Deferment of payment of rent payments in case of use of the state or municipal property;
- Receipt of gratuitous subsidies for the payment of salaries to employees (at the rate of 12,130 rubles for each employee);
- Granting soft loans for six months for the purpose of paying salaries to employees.
Most of the measures of the Central Bank of Russia in connection with the pandemic were taken in the period from March 1 to September 30, 2020. They mainly concerned the relax-ations in terms of compliance with the terms of credit contracts - the possibility to defer pay-ments and restructure debts for citizens and organizations. Small and medium-sized businesses were given the opportunity to obtain credit at a low rate for Russia - 8.5 percent per annum for up to three years for any purpose under the program of the Bank of Russia to stimulate lending to small and medium businesses. Immediately after the start of the pandemic, the government set aside 1.4 trillion rubles to support the economy and citizens; by June it had increased to 5 trillion rubles, and by fall the cost of the anti-crisis plan had risen to 6.4 trillion rubles.
In August 2020, the KPMG surveyed representatives of large businesses to find out ex-actly what tax support measures Russian taxpayers were able to take advantage of during the pandemic, how effective they were, and what tools can be used in the future. The results of the study showed that almost two-thirds (62%) of the surveyed companies could not use the measures of state support in the tax sphere provided for by the Resolution of the Government of the Russian Federation ? 409 (Resolution of the Government of the Russian Federation of April 2, 2020), except for postponement of reporting, because they did not meet the criteria for their receipt. Eight percent of the companies took advantage of the automatic postponement of tax payments, and 18 percent took advantage of the reduced tariffs of insurance contributions. Re-spondents also stated the lack of availability of tax instruments of state support compared to non-fiscal measures and the orientation of support measures towards the segment of small and medi-um businesses, the affected industries and systemically important enterprises. The anti-crisis tax measures of the Government did not help a significant part of large businesses at all, most of which do not belong either to the backbone companies, or to the affected industries. It should also be noted that inclusion into the list of backbone companies has not become a guarantee of access to tax preferences. Many companies did not apply for measures of fiscal support due to the complexity of the application procedure and additional criteria stipulated by the Resolution of the Government of the Russian Federation ? 651 (Anti-crisis measures, 2020).
A similar study, but in relation to small businesses was published by Boris Titov, the Presidential Commissioner for the Protection of Entrepreneurs' Rights. In the research the fol-lowing assessment is presented:
- 45.34 percent of small business respondents were unable to take advantage of any support measures;
- 23.55 percent of those surveyed used a deferral of all taxes (excluding VAT);
- 20.7 percent of those surveyed used a loan at 2 percent to restart operations;
- 19.3 percent of those surveyed took advantage of an insurance premium deferral.
38.6 percent of the entrepreneurs who took advantage of some measure of support should repay their obligations in the near future. However, almost half of them (49.5 percent) need a new restructuring because they will not be able to repay the debt when it becomes due. Another 9.3 percent believe that they will not be able to repay their debt and will have to close their business.
Social Consequences of the Lockdown in Russia
In October 2020, the Federal State Statistics Service (hereafter, Rosstat) reported a significant increase in unemployment. The unemployment rate was 4.6 percent at the beginning of the year, 4.7 percent in April, 6.2 percent in July, and 6.3 percent in October. This is the high-est level in the last eight years. In 2008, due to the recession caused by the global financial crisis, the unemployment rate was 6.3 percent, in 2009 - 8.4, in 2010 - 7.5 percent. The number of un-employed in Russia is estimated by Rosstat through surveys of the population according to a special methodology. The number of unemployed registered in employment centers in 2019 was about 700 thousand people, in January 2020 - 691 thousand, in April 2020 - 727 thousand, in Ju-ly – 3 311 thousand, in October 3 470 thousand people. The low level of registered unemploy-ment can be explained by the fact that employment centers automatically remove from the regis-ter all the unemployed who twice in a row refused to work offered to them. The maximum peri-od of unemployment benefit payment is 1 year from the date of dismissal from the last job. Ap-parently, this tendency to register as unemployed was related to the President's promise to pay increased unemployment benefits in 2020 - 12,130 rubles. ?? 2019 ???? ???????????? ??????? ?? ??????????? ? ?????? ????? ??? ?????????? 4 900 ??????, however, it was increased to 8,000 rubles in 2019. In addition to benefits, registered unemployed people in April-June 2020 were entitled to payments for children at the rate of 3,000 rubles for each child.
A total of 144.7 billion rubles was allocated for unemployment benefits in 2020. Most of these funds were budgeted, while 35.3 billion rubles were received in the Reserve Fund. In the fall of 2020, the Ministry of Labor and Social Protection of the Russian Federation announced the need for a total of 185.3 billion rubles for unemployment benefits. However, the relevant or-ders for the allocation of additional funds until mid-January 2021 have not been signed.
Families with children twice received a lump sum payment of 10 thousand rubles for each child. According to the Minister of Labor and Social Protection of the Russian Federation, Anton Kotyakov, during the meeting of the Presidential Council for the Implementation of the State Policy in the Field of Family and Child Protection on November 30, 2020, over 1.5 trillion rubles was allocated from the federal budget to support families with children in 2020, of which almost 600 billion were additional support measures for families with children in the face of the pandemic. In total, in 2020, expenditures on social support accounted for 11 percent of all ex-penditures on social policy (6.99 trillion rubles)).
Official Estimates of Losses from Lockdown
The article "Scenarios for Russia's Economic Situation in 2020-2021 and Economic Poli-cy Challenges" points out, in particular: "It is difficult to find analogues to such a shock in mod-ern Russian or foreign history; nevertheless, we dare to suggest that by its nature it is rather close to the situation of the early 1990s and the transition from a planned to a market economy, when the established economic and logistical links are broken due to the loss of certain subjects of economic activity from the economy" (Vedev et al., 2020). And further in the same article with reference to the work of Blanchard Olivier and Michael Kremer [38] presents the following con-clusion: "the depth and duration of the decline in industries in this case critically depends on the complexity of the production chain (the number of suppliers of materials and components), and since under quarantine the maximum restrictions refer to the service sector, where production chains are mostly simple and short, even with a possible great depth of recession its period is de-termined solely by the time of preservation of regulatory restrictions and Therefore, we will con-sider this shock in all scenarios (see below) as fully realized in 2020, with no transition to 2021."
Indeed, by the end of 2021, despite the ongoing epidemic, many economic indicators had improved and the price of oil had returned to the $50 per barrel level thanks to the OPEC+ pro- duction limitation agreement and the advent of vaccines. The recovery of China, which continues to be one of the main importers of Russian hydrocarbons, also played an important role.
The index of industrial production (as a percentage of the corresponding month last year) in April was less than 100 percent, in May fell to a minimum value of 92%, was equal to 93% in June, and then, due to the removal of restrictions, began to increase. It is most likely that in 2021 the world economy, and hence the Russian economy, will grow. Specialists at the Institute of Economic Forecasting (INP) of the Russian Academy of Sciences predict that the economy will recover to its previous values by 2022. The same is reported in the IMF forecast (International Monetary Fund, 2020): in 2021 the growth of the world economy - 5.5 percent, the growth of the Russian economy - 2.8 percent. The World Bank forecasts the growth of the Russian economy in 2021 equal to 1.6% (World Bank Group, 2020). These forecasts are based on the assumption that there will be no further mutations of the virus, that vaccines will be effective and that the epide-miological situation will improve significantly.
The second quarter of 2020 is most affected by the lockdown. However, some restrictions continued in the third and fourth quarters, both in Russia and in other countries. So, the econom-ic losses from the "shutdown" occurred mostly in the second quarter, but had a continuation in the third and to a lesser extent in the fourth quarter. According to Rosstat estimates made by the production method, GDP for the II quarter of 2020 in current prices was 23,288.2 billion rubles. This is 8.5 percent less than in the same period of 2019. The index of physical volume of GDP relative to the second quarter of 2019 was 92.0 percent, relative to the first quarter of 2020 - 98.1 percent. In the second quarter of 2019, GDP was 26,188 billion rubles. Thus, in the second quar-ter of 2020 the minimum losses (assuming no GDP growth in 2020) can be estimated at 2,900 billion rubles.
In 2020, even before it became known about the impending epidemic, annual GDP growth was projected at 1 - 1.5 percent. This estimate was given by Alexey Zubets, Doctor of Economics, Director of the Institute of Social and Economic Research of the Financial Universi-ty under the Government of the Russian Federation, as a result of a study of consumer sentiment in 2019, as well as forecast modeling of Russia's economic development (Zubets, 2019). An es-timate of GDP growth at a level not exceeding 2 percent per year was given by Boris Porfiryev, an academician of the Russian Academy of Sciences and director of the Institute of Economic Forecasting of the Russian Academy of Sciences (Porfiriev, 2020). (Porfiriev, 2020) The World Bank forecast Russia's GDP growth of 1.6 percent (Global Economic Prospects, 2020). The in-ternational rating agency Fitch estimated the growth of the Russian economy in 2020 at 1.5 per-cent. A little later, in December 2019, they changed their forecast, stating that Russia's GDP growth in 2020 was 2 percent due to an improvement in forecasts due to expectations of contin-ued government spending related to the implementation of national projects, as well as the easing of the monetary policy of the Bank of Russia. According to estimates of the Ministry of Econom-ic Development of the Russian Federation, GDP growth in 2020 was expected to be between 1.7 and 2 percent, depending on the speed and efficiency of implementation of structural measures of state policy, as well as depending on foreign economic conditions (Ministry of Economic Development of the Russian Federation, 2019). Thus, if we assume that GDP will grow by 1.5 percent in 2020, then we can get a rough estimate of losses in the second quarter of 2020 - 3,293 billion rubles, or approximately 3 percent of annual GDP.
However, the economy continued to suffer losses, even when enterprises and organiza-tions began to resume their activities. In Q3 2020, the nominal volume of GDP amounted to 27,941.3 billion rubles, its physical volume index to the corresponding period of the previous year - 96.6 percent. In the third quarter of 2019, GDP was 28,875.4 billion rubles. Assuming an annual growth rate of 1.5 percent, we get a rough estimate of GDP losses of 1,367.23 billion ru-bles.
Similarly, let us estimate losses in the fourth quarter of 2020. The Bank of Russia makes an assumption of about zero GDP growth in Q4 2020 (Information and analytical collection of the Central Bank of the Russian Federation, 2020), which means that GDP will remain at 27,941 billion rubles, while in Q4 2019 it was 29,815.6 billion rubles. Accordingly, losses in Q4 may amount to 2,322 billion rubles. Taking into account the absence of losses in the first quarter, we get an annual GDP loss of 6,982 billion rubles, which is 6.3 percent of the 2019 GDP level.
Bank of Russia Governor Elvira Nabiullina estimated at a press conference that a month of quarantine due to the coronavirus will cost the Russian economy a loss of about 1.5-2 percent of GDP in 2020. Natalia Osipova, chief economist at Alfa Bank, estimates that a quarantine could cost the economy 0.3 percent of annual GDP per week in March and 0.5 percent in April. A month of strict quarantine could cost the economy 2 percent of annual GDP. Accordingly, 9 weeks of lockdown would give a loss of 2.7 to 4 percent of annual GDP. Similar forecasts were given by Natalya Akindinova, director of the Institute of the Development Center of the National Research University Higher School of Economics: about 2 percent loss per month in a hard quarantine.
Indirect Estimates of Losses from the Lockdown in Russia
In 2020, Russia's economy was affected by two negative phenomena at once - a sharp de-cline in oil prices and restrictions due to the spread of the coronavirus. The epidemic affected all of Russia's trading partner countries. As other countries implemented nonproliferation measures, there were disruptions in global supply chains as well as slower economic growth. Below are estimates of the impact of each of these factors on GDP dynamics in 2020.
Impact of the Decline in Revenues from Oil, Petroleum Product and Gas Exports on GDP Dynamics
The export of hydrocarbons provides a significant share of foreign exchange earnings and revenues to the budget. According to the Federal Customs Service, in 2019 revenues from the export of crude oil and refined products (petroleum products, gasoline, diesel fuel, liquid fuel) together amounted to $240.3 billion. Of these, revenues from the sale of crude oil to other coun-tries amounted to $121.4 billion. This equals 56.6 and 28.6 percent, respectively, of Russia's total export revenues ($424.6 billion). Export revenues from natural gas in 2019 were $49.5 billion, or 11.7 percent of Russia's total export revenues. In 2019, Russia's GDP at current prices was $1,699.9 billion. Thus, in 2019, revenues from the sale of oil, petroleum products and gas amounted to 17.05 percent of GDP (oil and petroleum products - 14.14 percent, gas - 2.9 per-cent).
Data on Russia's exports of critical commodities for December 2020 have not been re-leased at this time. Between January and November 2020, Russia's exports totaled $302,020 mil-lion. With oil and petroleum products bringing in $138,817 million (45.96 percent of exports), gas $28,491 million (55.40 percent of exports).
To bring the 2020 data to annual values, we will assume that December export figures are equal to November's, i.e. we assume a conditional "zero" growth: revenues from exports of crude oil and petroleum products in November were $11,253.8 million; revenues from gas exports were $3,338.5 million. For clarity, let us present the data obtained in the Table 1.
| Table 1 Russia's Exports of Oil, Petroleum Products and Gas in 2019-2020, $ Million USD |
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|---|---|---|---|---|
| Indicator | January - December 2019 | Percentage of exports by Russia as a whole | January - December 2020 | Percentage of exports by Russia as a whole |
| Total exports | 424 626,8 | – | 331 995,70 | – |
| Crude oil and refined products | 240 323,8 | 56,60 | 150 070,5 | 45,20 |
| Gas | 49 553,1 | 11,67 | 31 829,1 | 9,59 |
| Crude oil, petroleum products and gas | 289 876,9 | 68,27 | 181 899,6 | 54,79 |
The table shows that Russia under-received $107,977.3 million, or 37.25 percent of the 2019 level, in revenue from the export of oil, petroleum products, and gas. Revenue from exports of oil, petroleum products, and gas in 2019 was 17.05 percent of GDP. Thus, the expected GDP in 2020 is $1,591.9 billion:
1 699,9 × (1 – 0,1705 × 0,3725)=1 591,9.
That is, the annual decline in GDP, due only to the loss of income from the export of oil, petroleum products and gas, is 6.4 percent:
(1 699,9 – 1 591,9)/1 699,9=0,064.
In order to calculate GDP losses for only the second, third, and fourth quarters of 2020, let's use data from the Federal Customs Service for January-March 2019 and January - March 2020 and subtract the necessary values from the annual values of exports. We get the April-December 2019 oil, petroleum products, and gas export income figures of $213,484.5 million; total exports of $319,766.0 million. Revenue figures for April through December 2020 will be $118,578.4 million and $242,522.9 million, respectively. The cumulative decrease in oil, petro-leum products and gas export revenues for the second, third, fourth quarters of 2020 is $94,906.1 million, or 44.46 percent. Taking the share of revenues from oil and gas exports at 17.05 percent, we get the expected decrease in Russia's GDP due to the loss of revenues from the export of oil, petroleum products and gas during this period at $502,876.48 million, or 7.3 percent of the 2019 GDP level. This is the amount Russia lost during the lockdown period on oil, oil products and gas exports alone.
Impact of Restrictions Imposed for the Purpose of Non-Proliferation of Coronavirus on GDP Dynamics
At the end of March, when non-working days were declared in Russia, about 13 percent of Russian companies followed the call of the authorities to take measures to prevent the spread of the coronavirus and sent at least some of their employees to quarantine. This is evidenced by the results of an online survey conducted by the service "??????.??" among its users and regis-tered employers. More than 4 thousand Russian residents and 1.5 thousand employers from all regions of the country took part in the survey. Quarantine was handled differently: sick leave, paid leave, or leave of absence. Paid leave was reported by employers in 25 percent of cases; employees responded that way in 22 percent of interviews. However, leave of absence was men-tioned by 16 percent of employees, while only 7 percent of employers said it was an option.
In April, the situation changed - any movement of citizens without a valid reason was banned. As reported by the Government of the Russian Federation [58], "the index of closure of regional economies (the ratio of the number of employees of enterprises that suspended opera-tions to the total number of workers) in April was on average 28 percent in Russia. That is, 28 percent of jobs were under some kind of restrictions. Some industries (consumer services, tour-ism, air travels, and several others) were shut down entirely. In addition, there were also indirect losses associated with the effect of inter-sectoral linkages, when changes in economic parameters in one industry affect the economic parameters of other industries. For example, a decrease in the rate of construction would necessarily affect the operation of companies producing cement, con-crete and reinforced concrete structures, as well as companies specializing in the transportation of construction cargo. Accordingly, industries associated with industries that suspended their ac-tivities also faced economic losses. In May, the value of this index was already 19 percent, and, as noted by Russian Minister of Economic Development Maxim Reshetnikov, this index has continued to decline since May. In June, due to the abolition of the self-isolation regime, the clo-sure index decreased to 10.4 percent.
Russia's labor force aged 15 and older in February 2020 was 74.5 million people, of whom 71.1 million were classified as economically active and 3.4 million as unemployed, meet-ing International Labor Organization criteria (that is, had no job or gainful employment, were looking for work, and were willing to start work in the week surveyed).
Table 2 shows the number of people directly affected by the lockdown. These data are al-so supported by a study conducted by specialists from the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASTF). The study concluded: "At least 15 million workers are directly affected (potentially unclaimed). Tax cuts are estimated at 4 trillion rubles" (The effect of "quarantine" for Russia, 2020). Calculation of the impact of the introduction of special treat-ment (self-isolation) is carried out using an inter-sectoral balance and takes into account not only direct, but also indirect effects.
| Table 2 Calculation of Loss of Working Time in Russia During the Lockdown Period |
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|---|---|---|---|
| Indicator | April | May | June |
| Index of economic closure (according to the Ministry of Economic Development of Russia) | 0,28 | 0,19 | 0,104 |
| Number of people who "dropped out" of the economy, million people. | 19,91 | 13,51 | 7,39 |
| Working time fund, hours/month | 175 | 135 | 167 |
| Lost work time, million hours | 3 484,25 | 1 823,85 | 1 234,13 |
A total of 6,542.2 million working hours were lost during the three months of lockdown. The annual time fund of all working people (71.1 million) is 127,126.8 million hours. Thus, the hours worked in 2020 are 120,584.6 million hours. On this basis, the expected decline in GDP due to the decline in the annual fund of working hours (excluding the impact of bankruptcies) is 6,642.2 million hours, which is 5.15 percent of the 2019 GDP level (110.046 trillion rubles), or 5.66 trillion rubles.
The decrease in the number of working hours is also evidenced by a decrease in revenues from personal income taxes to the budgets. According to the calculations of the rating agency National Credit Ratings (NCR), based on the data of the Treasury of Russia, at the end of the se-cond quarter of 2020 there was a 9.5 percent decrease in personal income tax revenues to the budgets of the subjects of the Russian Federation, which indicates a corresponding reduction in the wage fund in the regions. The largest cumulative decrease in the labor payment fund, accord-ing to NKR estimates, occurred in April-May (802 billion rubles, or 16.5% of the level of the corresponding months of the previous year). In June, after the gradual cancellation of much of the quarantine measures, the decrease in the payroll amounted to only 32 billion rubles from June 2019 (The price of quarantine, 2020). The data presented show the loss of income of offi-cially employed citizens. The decrease in income received was not due to direct dismissal, but to the introduction of part-time work, reduced week, or the registration of leave "on one's own ac-count. These losses are not counted in the unemployment data.
Bankruptcy of legal entities and individual entrepreneurs should be considered separately. In 2020, 956.5 thousand individual entrepreneurs and 544.8 legal entities were liquidated. If at the beginning of 2020 there were 4.05 million individual entrepreneurs and 3.7 million legal en-tities on the tax rolls, then at the beginning of 2021 their number decreased to 3.7 and 3.4 mil-lion, respectively. That is, the total reduction in the number of individual entrepreneurs and legal entities was 8.3 percent of the 2019 level (the reduction in the total number of individual entre-preneurs is 336.1 thousand registrations, or 9 percent of the 2019 level, the reduction in the total number of legal entities is 311.8 thousand, or 8 percent of the 2019 level). The number of sole proprietorships and sole proprietorships on the register of small and medium-sized businesses decreased by 5 percent (from 5.9 to 5.6 million businesses) in the first nine months of 2020 (from April to December). A total of 295,000 companies dropped out of the register during this period.
At the same time, it is still too early to talk about the wave of bankruptcies due to the fact that in January 2021 the moratorium is still in effect (see Resolutions of the Government of the Russian Federation (Resolution of the Government of the Russian Federation, 2020; Resolution of the Government of the Russian Federation, 2020). About 1.3 million companies and individu-al entrepreneurs fall under the moratorium. Nevertheless, the threat of mass closures of enter-prises still exists. Alexei Kudrin, head of the Accounts Chamber, stated this in November 2020 at the All-Russian Civil Forum: "I agree with the difficult situation of small and medium busi-ness. It is assumed that a third of it, taking into account the second wave may stop. It may even be the minimum.".
Rosstat estimates the share of small and medium-sized enterprises in Russia's GDP at 20.6 percent, or 22.7 trillion rubles. This value is understood as the ratio of the total volume of gross value added created by medium and small enterprises (including microenterprises) and in-dividual entrepreneurs to gross value added in basic prices of all economic entities (The share of small and medium-sized businesses in the gross domestic product, 2020). The sources of infor-mation on these data are primarily data from the registry of small and medium-sized enterprises of the tax service, as well as the accounting records of enterprises. The elimination of 30 percent of small businesses could result in a loss of 6.2 percent of GDP, or 6.8 trillion rubles. Then the cumulative expected decrease in GDP due to the reduction in the working time fund and bank-ruptcies of legal entities and individuals due to the quarantine measures taken would be:
(-5.15%, reduced working hours factor) + (-6.2%, increased bankruptcy factor)=-11.35% of GDP, or 13.9 trillion rubles. (at an average annual ruble-dollar exchange rate of 72.1260).
Thus, the total losses of the Russian economy due to the pandemic are estimated at 13.6÷18.6 percent of GDP (2019 level), which is equivalent to 14.9÷20.47 trillion rubles, or $231.18÷316.18 billion:
- Losses from oil and gas export sales - 7.3 percent;
- Losses caused by a reduction in the working time fund and bankruptcies of legal entities and individuals - 6.3÷11.3 percent;
It should be noted that this is not an estimate of the fall in GDP in 2020, but a rough es-timate of Russia's losses due to reduced income from exports of oil and gas products, as well as from the "closure" of the economy.
The presented approach is by no means the only way to make an estimate of losses from the lockdown. Various methods and techniques of economic and mathematical modeling can be used for this purpose. For example, in the work of colleagues from China (Yumei et al., 2020), a multisectoral multifactor model was used, which allows to identify the losses of each of the 149 industries under study through the "input-output" tables. In Russia, a study to assess the losses of the economy due to the introduction of a day-off regime was made using an approach based on the decomposition of production indices series by individual types of economic activity (Belev, 2020). As a result, it was concluded that the "cost" of quarantine measures for the economy in 2020 was 0.37 percent of GDP in the first quarter and 7.79 percent of GDP in the second quarter. As the authors themselves report, "the estimate of the 'cost' of quarantine measures takes into ac-count only the number of working days in the period in question, but not disruptions in supply chains, etc." Due to the fact that the study was already published in July 2020, it could not take into account the cost of "eliminating the consequences" of forced economic downtime.
It is also worth paying attention to the fact that the estimates of losses given by us, as well as those presented in the mentioned study (Belev, 2020), are an order of magnitude higher than the estimates of GDP losses voiced by Rosstat, the Accounts Chamber (-6%), the Bank of Russia (-4%÷6%), the World Bank (-1%), the IMF (-4.1%), and various international and Russian ex-perts. In this regard, Academician Pavel Minakir wrote the following in the early summer of 2020 "... the budget losses may amount to more than 1.5 trillion rubles only due to falling oil and gas revenues by the end of the year. To this should be added at least Rb 5 trillion of shortfall in budget revenues due to the above-mentioned decrease in the nominal value of GDP. Given the above-mentioned cost of the "anticoronavirus" package, as well as the Rb 2.4 trillion paid by the Government to the Central Bank for a package of shares in Sberbank, the total financial costs can be estimated at Rb 11-12 trillion (Minakir, 2020).
An epidemic can happen unexpectedly, and in this case it is necessary to have reserves to support business and citizens. In 2020, Russia's economy was closed for only 3 months, but the losses are enormous - both economic and social. And here we can only quote the conclusions made in the work of Vladimir Obolensky: "The experience of the previous global crisis shows that state intervention in the economy is the only effective means of overcoming the emerging imbalances with the least losses, although it does not solve all the emerging problems...". (Obolensky, 2020). The Sovereign Wealth Fund now concentrates about 9 percent of GDP, that is, the money to support the economy and its recovery is clearly not enough - we will have to increase domestic debt, launch the emission mechanism and take extraordinary, but effective management decisions.
The coronavirus pandemic has triggered a global economic crisis that has every chance of turning into a global financial crisis with an unpredictable development. The lockdown, which lasted in Russia for about nine weeks, led to losses, which we estimate at 13.6÷18.6 percent of GDP (2019 level), which is equivalent to 14.97÷20.47 trillion rubles, or 231.18÷316.18 billion US dollars. The economy of Russia, and the whole world, is waiting for a long period of recov-ery, regardless of whether this value of losses will be recognized or not.
Putin declared the next week non-working // RBK. 03/25/2020. URL:https://www.rbc.ru/society/25/03/2020/5e7b5c939a7947f15a9150f0
Decree of the President of the Russian Federation of March 25, 2020 No. 206 "On the announcement of non-working days in the Russian Federation."
Mishustin ordered to completely close the borders of Russia // RBK. 03/28/2020. URL: https://www.rbc.ru/society/28/03/2020/5e7f58fe9a79475dfb4ce184
Resolution of the Chief State Sanitary Doctor for the city of Moscow dated March 20, 2020 No. 2 "On the introduc-tion of restrictive measures (quarantine)".
Fitness clubs, swimming pools and water parks are temporarily closed in the capital. 03/21/2020. URL: https://www.mos.ru/news/item/71408073/"
Self-isolation regime was introduced in 26 regions of Russia // RIA Novosti 03/31/2020. URL: https://ria.ru/20200331/1569375432.htm
Restrictive measures due to coronavirus extended every second region of Russia // TASS 04.04. URL: https://tass.ru/obschestvo/8164823
Sobyanin announced the introduction of access control in Moscow // RIA Novosti. 10.04.2020. URL: https://ria.ru/20200410/1569881241.html
Albert Khabibrakhimov. Putin announced the end of the "non-working" days from May 12 // VC.RU 05/11/2020. URL:https://vc.ru/legal/126281-putin-obyavil-o-zavershenii-nerabochih-dney-s-12-maya
Moscow will draw up a timetable for further lifting restrictions. 04.06.2020. URL: https://www.mos.ru/mayor/themes/12299/6566050/ House Investment Company. 09/06/2020.
Summer verandas began to work in the capital. 06/16/2020 // Official website of the Mayor of Moscow URL: https://www.mos.ru/mayor/themes/5299/6592050/?utm_source=search&utm_term=serp
The fight against coronavirus: the situation in Moscow is stabilizing. 05/27/2020. URL: https://www.mos.ru/mayor/themes/1299/6539050/?utm_source=search&utm_term=serp p
Moscow is ready to lift restrictions imposed due to coronavirus. URL: https://www.1tv.ru/news/2020-05-27/386619-moskva_gotova_k_otmene_ogranicheniy_vvedennyh_iz_za_Coronavirusa
The list of Putin's instructions to support citizens and businesses amid the coronavirus. URL: https://iz.ru/991411/2020-03-25/perechen-poruchenii-putina-po-podderzhke-grazhdan-i-biznesa-na-fone-Coronavirusa
Measures have been identified to ensure sustainable economic development in connection with the spread of the new coronavirus infection. URL: http://government.ru/docs/39392/
Decree of the Government of the Russian Federation of April 3, 2020 No. 434 "On approval of the list of sectors of the Russian economy that are most affected by the deterioration of the situation as a result of the spread of a new coronavirus infection."
Business support measures // STOP Coronavirus. URL: https: //xn--80aesfpebagmfblc0a.xn--p1ai/what-to-do/business/
Business support during the spread of coronavirus: what has been done. URL: http://duma.gov.ru/news/48315/
Coronavirus: measures to support citizens and businesses // Central Bank of the Russian Federation URL: https://www.cbr.ru/covid/
Information letter of the Central Bank of the Russian Federation dated 20.03.2020 No. IN-06-59/24 "On the restruc-turing of loans (loans) to SMEs"
Mikhail Mishustin Vedomosti. URL: https://persona2020.vedomosti.ru/articles/mihail-mishustin
Results of monitoring anti-crisis measures of state support // Ombudsman under the President of the Russian Federa-tion for the protection of entrepreneurs' rights URL:https://ombudsmanbiz.ru/2020/11/lish-tret-predprinimatelej-poluchivshih-kredity-pod-2-sposobna-vypolnit-uslovie -po-sohraneniju-shtata-po-sostojaniju-na-1-dekabrja/# 1
Employment and unemployment in the Russian Federation in October 2020 (according to operational statistics).URL: https://rosstat.gov.ru/storage/mediabank/wFtwOnek/zanyatost-i-bezrabotitsa.pdf
Table 4.15 "Unemployment rate (percent)" from the Collection "Regions of Russia. Socio-economic indicators ", 2011. URL: https://www.gks.ru/bgd/regl/b11_14p/IssWWW.exe/Stg/d01/04-15.htm
Employment and unemployment in the Russian Federation in October 2020 (according to operational statistics) Rosstat https://rosstat.gov.ru/storage/mediabank/wFtwOnek/zanyatost-i-bezrabotitsa.pdf
Resolution of the Government of the Russian Federation of March 27, 2020 No. 346 "On the minimum and maxi-mum amounts of unemployment benefits for 2020" (as amended and supplemented).
Resolution of the Government of the Russian Federation of December 8, 2016 No. 1326 "On the minimum and maximum amounts of unemployment benefits for 2017".
Mikhail Mishustin signed an order to allocate another 35 billion rubles for unemployment benefits. 09/12/2020 // Government of Russia URL: http://government.ru/docs/40393/
The need for unemployment benefits in Russia is 185.3 billion rubles // TASS. 09/11/2020. URL: https://tass.ru/obschestvo/9426961
The head of the Ministry of Labor spoke about financial support for families with children in 2020. URL: https://iz.ru/1093975/2020-11-30/glava-mintruda-nazval-obemy-finpodderzhki-semei-s-detmi-v-2020-godu
The budget of Russia in 2020 was executed with a deficit of 3.8% of GDP // Finmarket. 21.01.2021. URL:https://clck.ru/TDH3A
Industrial production dynamics (2019 - 2020). 21.10.2020. URL: https://rosstat.gov.ru/storage/mediabank/cTTHo9ss/dinam-p.docx
Alexandra Koshkina. Economists predict a post-crisis rebound in 2021 // Vedomosti. January 17, 2021. URL:https://www.vedomosti.ru/economics/articles/2021/01/17/854374-ekonomisti-prognoziruyut
GDP, when calculated by the production method, is the sum of the gross value added of all industries or institutional sectors at basic prices and net taxes on products.
On the production of gross domestic product (GDP) in the second quarter of 2020. URL: https://rosstat.gov.ru/bgd/free/B04_03/IssWWW.exe/Stg/d05/167.htm
First estimate of GDP for Q2 2019 using income method. URL: https://rosstat.gov.ru/folder/313/document/63816
Oil prices have a limited impact on the growth of the Russian economy; key factor - reforms // FitchRaiting. 06/15/2020. URL: https://www.fitchratings.com/research/ru/sovereigns/tseny-na-neft-imeyut-ogranichennoe-vliyanie-na-rost-ekonomiki-rossii-klyuchevoj-faktor-reformy-15-06-2018
Fitch Raises Forecasts for Russia's GDP Growth for 2019?2021 // Financial House Investment Company. 09/06/2020. URL:https://fdom.ru/other_news/fitch_povyisilo_prognozyi_rosta_vvp_rf_na_2019_2021_godyi/
According to Rosstat estimates, GDP at the end of 2019 amounted to 110,046 billion rubles. Rosstat presents the second GDP estimate for 2019. 04/01/2020. // Rosstat URL: https://rosstat.gov.ru/folder/313/document/81201
Rosstat presents the first GDP estimate for Q3 2020. URL:https://rosstat.gov.ru/folder/313/document/108301
Rosstat presents the second GDP estimate for 2019. URL:https://rosstat.gov.ru/folder/313/document/81201
Bank of Russia Governor Elvira Nabiullina's speech at a press conferenceOil prices have a limited impact on the growth of the Russian economy; key factor - reforms // FitchRaiting. 06/15/2020. URL:https://www.fitchratings.com/research/ru/sovereigns/tseny-na-neft-imeyut-ogranichennoe-vliyanie-na-rost-ekonomiki-rossii-klyuchevoj-faktor-reformy-15-06-2018
Fitch Raises Forecasts for Russia's GDP Growth for 2019?2021 // Financial House Investment Company. 09/06/2020. URL:https://fdom.ru/other_news/fitch_povyisilo_prognozyi_rosta_vvp_rf_na_2019_2021_godyi/
According to Rosstat estimates, GDP at the end of 2019 amounted to 110,046 billion rubles. Rosstat presents the second GDP estimate for 2019. 04/01/2020. // Rosstat URL:https://rosstat.gov.ru/folder/313/document/81201
Rosstat presents the first GDP estimate for Q3 2020. URL:https://rosstat.gov.ru/folder/313/document/108301
Rosstat presents the second GDP estimate for 2019. URL:https://rosstat.gov.ru/folder/313/document/81201
Bank of Russia Governor Elvira Nabiullina's speech at a press conference April 3, 2020. URL:http://www.cbr.ru/press/event/?id=6615
How much will quarantine cost Russia? Economists answer. URL:https://www.bbc.com/russian/news-52364752
Russian exports of the most important goods for January - December 2019. URL:https://customs.gov.ru/
GDP (current US $) ? Russian Federation. // World Bank URL: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=RU (World Bank national accounts data and OECD National Accounts data files).
Russian exports of the most important goods in January - November 2020. URL: https://customs.gov.ru/
Russian exports of the most important goods in January - December 2019. URL:https://customs.gov.ru/
The indicator is calculated by summing up the data on exports for the period from January to November and for November. For the calculations we conventionally accepted "zero" growth (see: Russian Exports of Critical Goods in January - November 2020. URL:https://customs.gov.ru/).
Revenues from the export of oil, oil products and gas in January - March 2019 to USD 76,392.4 million. URL:https://customs.gov.ru/
Revenues from the export of oil, oil products and gas for the period January - March 2020 to USD 63,321 million. URL:https://customs.gov.ru/
Over 10% of companies in Russia reported on the quarantine imposed on workers. URL:https://www.rbc.ru/economics/20/03/2020/5e73ac869a7947eb51098711
Reshetnikov: the index of economic closure in the regions of Russia due to the coronavirusdropped to 19%. URL:https://www.economy.gov.ru/material/news/ekonomika_bez_virusa/reshetnikov_indeks_zakrytosti_ekonomiki_v_regionah_rossii_iz_za_koronavirusa_snizilsya_do_19.html
The index of openness of the economy in the regions of Russia increased to 89.6% // Finmarket. June 9, 2020. URL: http://www.finmarket.ru/news/5255399
Employment and Unemployment in the Russian Federation in February 2020 (Based on the Labor Force Survey) // Rosstat. URL: https://gks.ru/bgd/free/B04_03/IssWWW.exe/Stg/d05/53.htm
To calculate the number of people "dropped out" of the economy, we need to multiply the number of people em-ployed in the economy (71.1 million) by the "index of economic closure.
Production calendar for 2020 // Garant.Ru. URL:https://www.garant.ru/calendar/buhpravo/2020/
To calculate lost working time, the number of people "dropped out" of the economy must be multiplied by the work-ing time fund.
The list of days on which it is officially possible not to go to work is specified in Article 112 of the Labor Code of the Russian Federation. With a 40-hour work week, the annual time allow-ance per employee in 2020 was 1,788 hours.
Rosstat presents the second GDP estimate for 2019. URL:https://rosstat.gov.ru/folder/313/document/81201
The estimates of the NCR are based on the data on actually paid taxes on personal income from income whose source is a tax agent, except for income in respect of which the tax is calcu-lated and paid in accordance with Articles 227, 227.1 and 228 of the Tax Code of the Russian Federation. The source of data are reports on the execution of the budgets of the subjects of the Russian Federation.
The number of legal entities and individual entrepreneurs registered and liquidated from 2002 to 2021 (as of January 10, 2021) // Federal Information Service. URL: https: //xn--h1ari.xn--p1ai/Main/StatisticalInformation
Dynamics of the number of operating legal entities, individual entrepreneurs and their total indicator from 2002 to 2021 (as of January 10, 2021) // Federal Information Service. URL: https: //xn--h1ari.xn--p1ai/Main/StatisticalInformation
Unified Register of Small and Medium Business // Federal Tax Service. URL:https://rmsp.nalog.ru/?t=1611427612829
Kudrin allowed the closure of a third of small and medium-sized businesses due to COVID-19. URL:https://www.rbc.ru/business/28/11/2020/5fc227b89a79472c6f0858be
The share of small and medium-sized businesses in the gross domestic product // EMISS. State statistics. URL:https://fedstat.ru/indicator/59206
This value represents an upper estimate of the negative effects caused by the introduction of quarantine measures, because the factors of the decrease in the total fund of working hours and the increase in bankruptcies are mutually correlated. In reality, the cumulative losses should be lower and in the range of 7 to 11 percent. More precise estimation of their total influence is difficult because of the "noisiness" of the information ar-ray.
Dynamics of the official rate of a given currency // Central Bank of the Russian Federation URL:http://www.cbr.ru/ This figure does not take into account the loss of GDP from other significant export revenues, such as the export of metal products, timber, coal and equipment.