The coronavirus lockdown has hit services and retail in Russia extremely hard. This industry is making a small contribution to GDP; however, a significant number of people are involved in it, according to Sergei Khestanov, economist and associated professor at the Russian Academy of National Economy and Public Administration (RANEPA), who spoke during a Zoom conference, The World After the Pandemic, organized by the Invest Foresight business magazine as part of the Engineering the Future Club project.
Sergei Khestanov noted that in early May, several million people in Russia may lose their jobs because of the lockdown.
According to a pessimistic prognosis, 5–7 mio people may become unemployed. If the lockdown continues until late May, this figure will grow to 20 mio. The economist argues that this is a substantial share because only 70 mio Russians are involved in the Russian labor market.
The economist added that in the near future, the Russian economy will face export losses and reduced VAT collection rates.
“A lower collection of revenue from VAT will happen for two reasons. First, when exports fall, imports are reduced too. VAT on foreign goods makes a significant contribution to the budget. Second, in the near future we will feel the consequences of the lockdown, which also will strike a blow at VAT collection rates,” Khestanov said.
Khestanov emphasized that the unfolding crisis can be compared with the one of 1998. The economist added that the drop in oil prices could drag on for a while.
“Against the backdrop of high oil prices, even the USSR could ensure the wellbeing of its citizens. But when the prices fell, so did the USSR. The current oil prices are close to those during the collapse of the Soviet Union,” the expert concluded.