How COVID-19 is impacting SMEs in Russia
The extension of non-business days until 30 April poses a challenge to the survival of Russian company owners. As many other countries, Russia is working on a package of measures to soften the economic impact of coronavirus pandemic.
The only example of an exit from this crisis and transition to a normal economic life remains China, which shows that rapid recovery will not be possible. The optimistic outlook for the People’s Republic of China for the current year is 2.5% of GDP growth. The Russian authorities must be prepared for the inevitable recession and, on that basis, set the realistic goal of preserving Russian employment and income, which will require the creation of additional jobs in all sectors of the economy.
The two recent speeches of Vladimir Putin addressed to the population have indicated a number of areas of work. Lack of information and uncertainty about the future create anxiety among many people and companies which induce them to overestimate risks that adversely affect the economy. Everyone is naturally concerned about what will happen in the upcoming year, which will be the hardest test for the economy.
The shock that the Russian economy is experiencing today is unprecedented against the backdrop of the last two crises. In December 2014, when the ruble suffered a collapse due to falling oil prices and Western sanctions, and in the fall of 2008, when the Russian economy began to brake sharply as a result of the global financial crisis, there has been an acceleration of capital outflows and a decline in commodity prices, which have jeopardized the stability of public finances.
The Government will be on the same heist as it was in the early 90’s, when many fellow citizens felt abandoned not only by them, because the budget could barely scrap together the funds to support workers in distressed enterprises, but also because reformers did not pay due attention to explaining the essence of market transformations, which is not always obvious to a society that has lived under socialism for more than half a century.
It would be quite unforgivable if such a mistake were to be repeated, especially since the Russian economy could be in about the same place as in 1992 in one month.