The Russian government is already preparing (Rus) to lift lockdown and restart the economy, which means there are unlikely to be any new anti-crisis measures. The Bell calculated that the total amount of support for Russia’s coronavirus-hit economy amounted to 2.6 percent of GDP, up to five times less than the equivalent spending by most Western countries.
- The government has announced three packages of support for businesses and individuals since the crisis began, the most recent on May 11. In total, they will cost 3 trillion roubles ($42 billion). Half is cash handouts, while the rest is made up of tax breaks or the waiving of other obligatory payments.
- Small and medium-sized businesses have been the biggest recipients of state support (63 percent of the total and 30 percent of the ‘real money’). Under an affordable loan scheme, small companies (with up to 500 employees) on a list of vulnerable industries can take out loans to pay staff. If these companies still employ 90 percent of their payroll by October, they won’t have to repay the loans. The main complaint about this scheme has been that the size of the loans are limited by the official monthly minimum wage of 12,300 rubles ($173), which is four times less than Russia’s average salary.
- The second biggest group of recipients are those with children and the unemployed (18.2 percent of the total, 30 percent of the ‘real money’). All parents of children aged between three and 16 will receive a one-time payment of 10,000 rubles ($140) for each child, and there are subsidies for those in poverty and those recently unemployed. Some economists criticized this as a ‘hidden tax on not having children’, but others pointed out there is a direct correlation between the number of children you have and level of wealth.
- The rest of the money will go toward covering regional budget deficits (5 percent of total), victims of the fight against coronavirus, and direct subsidies and affordable loans for major companies, for example airlines (4 percent).
Russia’s total anti-crisis spending of $42 billion is far less than what is being spent in Europe (on average 10 percent of GDP) or the U.S. (14 percent). Russia could easily have spent much more: the country has $565 billion in gold and currency reserves, and the liquid portion of its National Wealth Fund — created for crisis situations — is worth $156 billion. In addition, Russia has historically low levels of debt and could have decided to increase borrowing. But President Vladimir Putin and the government prefer caution because of a traumatic experience in the 2008 financial crisis when Russia burned through almost all its reserves. They likely also want to save the money for a populist spending spree ahead of the 2024 presidential election.
Why the world should care
Russia’s cautious approach to containing the economic consequences of the coronavirus may save money, but it could lead to political problems if the economic downturn is particularly severe, or obviously more painful than in European countries.