The second wave of the pandemic is very likely, and the government is naïve to hope for a recovery in demand is not oil and not really support the population, says the economist Igor Nikolayev.
Foreign countries are faced with the second wave of coronavirus. What awaits the Russian economy in case of a possible return of the infection, says the Director of the Institute of strategic analysis Igor Nikolaev.
— Igor Alekseevich, what are the expectations not a doctor but an economist on the possible “second wave”?
— The probability of the second wave, I believe, is very high. In any case, when analyzing graphs of the pandemic in different countries, where there are already signs of a second wave, come to the conclusion that the probability is growing. And if so, likely a new quarantine. And we are already frayed quite strongly: in April—may, the fall in GDP is 12%, June is better, although there are only estimates of Ministry of economic development: minus 4.2% of GDP. I believe this data is underestimated. But June is the month when the quarantine restrictions have almost everywhere been removed. Nevertheless, we see a significant drop is still in the industry.
In particular, I drew attention to the retail trade: a minus of 7.7%. It is clear that it fell in the previous two months: more than 20% in April and nearly 20 percent in may, in the conditions of the quarantine. It would seem that in June the pent-up demand was even taken, this figure is a plus, but instead continued to fall and very seriously.
— Because I believe that people really “sunk in income”. And our authorities never switched to large-scale financial support. Limited point, although visible measures to support families with children. But in many countries were provided with large-scale it support — we do, as we know, was not. June is revealing: the economy does not “rebound” as one could hope for. She just slowed down: not falls as in April—may but still at a serious disadvantage compared to the corresponding period in 2019.
For comparison, the Chinese economy, which in the first quarter showed a decline, the second is a plus. And our still falling. Prospects is a very strong effect. One thing: you are already growing — and then the second wave. And you’ll slow down. And another thing, if you continue to fall, but you still kick in the back. What then? An even more precipitous decline. What, for example, will the demand for oil? Our official projections assume that it will recover, if not by the end of this year, as Minister Novak said, by mid-2021. I am convinced that this will not happen!
Coronavirus seriously reduced global demand for hydrocarbons. In a delayed economy, even when so popular was the work on remote, video formats… All this objectively reduces the demand for gasoline and petroleum products. This means that oil prices will recover to $60-70, as they were before and in the early stages of the crisis. They will remain at best at the level of $40, perhaps even less. And if indeed the second wave starts, the oil again will roll down, because that again will be lockdown, the slump in demand.
General conclusion: the second wave — another shock for the Russian economy. Our forecast: we can have minus 10% of GDP by the end of the year, and even more. As part of the GDP we are saved only by the first quarter of the year: if he hadn’t been positive, we would now have had much worse than minus 10%. The first quarter aligns the picture for the whole year.
Does this mean that the economy will not sustain? No. It will withstand minus 15% of GDP, but…
And as far as we in this case will be poorer?
— Real disposable income in the second quarter fell by 8%. This is the official data of Rosstat. If at the end of the year will be minus 10% of GDP, the fall in real income will be greater: 12-14%.
— In such a situation should make our government?
— Competent economic policy measures could be quite effective to withstand the worst — if the government had the right idea about what is happening. Based on how we have saved money on care, and that they continue to hope that oil demand will recover and prices will “rebound”, I conclude that an adequate idea of what is happening, yet the government and the authorities in General, no.
The population we directly help did not, and in the industry hoping to preserve all and everything: impose a moratorium on layoffs and bankruptcy. But because you can and another way to counter this. We are also developing some sectors and sub-sectors. Even if the will and bankruptcy, but people will go to work in those sectors that are actively developing.
— What sectors and how should maintain?
The agriculture, food industry, pharmaceutical industry and production of medical equipment. Agriculture three months gives an increase of 3% from the same period last year. It could even become an industry that will replace our oil industry from the point of view of export opportunities. Food grows well, and in the pharmaceutical growth of more than 20%. There are orders, state orders. Overalls — almost twice the production grew, and even the furniture industry, some of its subsectors, hospitals must equip.
So, it would be necessary to encourage the development of those industries that show a good trend. Soft loans could be very popular. But it is not. Then we have to recognize that we are structurally not going to rebuild the economy, although it requires it. A year later, it appears that we missed the boat.