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All the more likely that go into the negative

Все больше шансов, что уйдем в минус

The impact of the epidemic coronavirus clearly underestimated — it could trigger a global recession to hit Russia, says the economist Igor Nikolayev.

According to Rosstat, the growth rate of the Russian economy in 2019 amounted to only 1.3%, a decrease of almost two times compared to the 2018 year, when the figure reached 2.5%. The situation in world and Russian economy continues to slowly deteriorate in the current year. In particular this applies to the fall of Russian exports, mainly raw materials. Given the proliferation of the epidemic is coronavirus and the slowdown in the second economy in the world China — the prospects are not rosy.

About how all this might affect the Russian economy this year, columnist of “Rosbalt” talked with the Director of the Institute of strategic analysis Igor Nikolayev.

— The growth of the Russian GDP by the end of 2019 was twice lower than a year earlier. How do you explain it?

Why should we have growth? The tax burden has increased. Just 2019, we became a year of growth of the value added tax (VAT). Investments in fixed capital of 0.7% (statistics on this indicator as there for 9 months last year), it is possible to say that they don’t grow. And this is understandable. When taxes increase, where to increase investments in fixed capital? Was hoping for national projects, but it is government investment, which by and large do not make the weather. And private investment come to us. Therefore, any growth there. Ineffective economic policies — that’s one way to phrase it.

Structural reform seems to be taking place, but not enough. In addition, they feature (in this case, bad) is that they cannot be completed in a few months. Needed less to say about what we need, they say, to get off the oil needle, and do more. And that in twenty years this was repeated, but now for a few months trying to make our economy a resource based economy with a predominant share of manufacturing industries.

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Let’s not forget this very important factor, as sanctions. He, of course, also limits our growth. In terms of sanctions to live, of course, possible, but as they say, unless it is life? In any case, quickly in terms of external restrictive measures to evolve is impossible, it is excluded. Sanctions create a high degree of uncertainty, and this is one answer to the question why do not come to us investment.

— Looking through the statistics I noticed that in the past year, we have reduced exports, which in Russia are known, mainly raw materials. So here’s my question: what do you attribute that, given the fact that the prices of our main export commodity — oil — in 2019 was more or less stable?

— Yes, the price of oil was more or less stable — fluctuated around $ 60 per barrel. And our exports have decreased because in General in the world economy, the pace of development which also decreased demand for oil and oil products decreased. Had an impact on reducing demand for hydrocarbons and international agreements on oil production, like OPEC+. Warm winter of last season also affected. This year, the weather factor will be reflected in the market demand for oil even more. Add to this our “float” with Ukraine and Belarus on oil and gas… all In all, this led to a decline in demand for oil.

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— In your opinion, is it possible to predict the growth of Russia’s GDP in 2020, taking into account the trends that are taking place? For example, all analysts now predict a further fall in oil prices, in particular, in connection with the spread of the coronavirus…

— Our center was doing such assessments. If the GDP growth of Russia in General is, it is, most likely, will not exceed 1%. And so, probably, we hang out around zero. At the same time, the chances that we do go into the negative, rise. Because the factor of coronavirus in General, from my point of view, is clearly underestimated. It can provoke global economic recession in the world, and the probability of this is increasing. If this happens, we this will be reflected directly and immediately. So the probability that the rate of growth we will remain in positive territory, are shrinking with each passing day.

— Again this is related to the reduction of our supplies of oil abroad, especially to China?

Yes, China in recent years provided two thirds of the growth in demand for our crude oil and petroleum products. Now China has dramatically sags. Unknown how, but probably very hard. All this is pushing oil prices down.

While there are other factors. For example, shale oil production. The number of drilling rigs in the US in recent weeks is growing. And it also raises the price of oil. And as we remain an oil-producing country, for us this situation is very unpleasant.

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