Stability of Russia’s economy will support its fast recovery after the coronavirus pandemic

February—March saw an accelerated decline in external demand amid the spread of the coronavirus pandemic and falling prices for Russian exports. The risks of a deep recession in the global economy significantly rose over the last month. This resulted from a serious deterioration of the situation in global commodity and financial markets and anti-pandemic restrictions implemented by the authorities worldwide. Although the adverse consequences of the pandemic will ultimately affect the majority of industries, this impact will be mostly temporary. The measures being implemented in Russia to support the economy will contribute to its fast recovery after the pandemic. These are the findings by the authors of the new issue of the bulletin ‘Talking Trends’ prepared by the Bank of Russia’s Research and Forecasting Department.

The fiscal rule combined with other macroeconomic stabilisers is smoothing out the consequences of the slump in oil prices for Russia’s economy. The broad range of measures being currently taken is critical for combating the coronavirus outbreak and for a fast recovery of the Russian economy in the future.

The acceleration of inflation in March was driven by short-term pro-inflationary factors associated with the substantial weakening of the ruble due to the oil price downfall, as well as by the temporary increase in households’ demand for non-perishable goods. In addition, this new temporary rise in inflation is happening when inflation expectations of households and businesses are lower than in the previous years. This will be a factor limiting secondary effects of the current price growth acceleration. After the expected increase, inflation will stabilise close to the target level in 2021. This will be supported by the Bank of Russia’s monetary policy.

The findings and recommendations in the bulletin may differ from the official position of the Bank of Russia.