Russian Economy Needs $26bn Worth of Anti-Crisis Measures: Experts

A number of anti-crisis measures to support the Russian economy come into effect on May 1. The total amount of these measures is estimated at more than 2 trillion rubles ($26.9 bln). However, experts note that it will require more extensive action to prevent the recession, TASS reported.

So far, the support of the economy is planned in the form of separate packages of measures. Currently, the first two packages have been approved and are being implemented, while the government is discussing the third and fourth packages.

The first package is aimed at providing credit support to small and medium-sized enterprises, as well as individual entrepreneurs. The second package also includes measures that are aimed at supporting systemically important enterprises and airlines, as well as stabilizing regional budgets. The amount of funds that are planned to be allocated to support the economy as part of the first package of measures is 1.4 trillion rubles ($18.8 bln). The amount of funds allocated for anti-crisis support of the Russian economy under the second package is more than 600 billion rubles ($8bln).

The experts interviewed by TASS note that anti-crisis measures undertaken by the Russian government are correct in general, but their volume needs to be increased.

In their opinion, these purposes require at least twice as much as the earlier declared amount, which is about 5 trillion rubles ($67.3 bln).
According to experts, the most effective measures to support SMEs are the reduction of VAT and direct payments, which would save the number of employees.

According to Georgiy Ostapkovich, head of the Center for Market Studies at the Higher School of Economics, in order to stop the recession in the economy, it is necessary to allocate funds in the amount of 5-6% of GDP, which is 5 trillion rubles.

“The estimates they are voicing now are around 2.5-3% of GDP, which is insufficient in the current situation,” Ostapkovich says.

In turn, Alisen Alisenov, associate professor at the Department of Economics and Finance at the Department of Economic and Social Sciences of the Russian Presidential Academy of National Economy and Public Administration (RANEPA), notes that it is necessary to provide tax holidays and to increase the real amount of the support to 8% of GDP. According to him, the reduction of VAT and income tax would be the most effective measure to support businesses.

Laura Nakoryakova, head of the Center for Social and Economic Research at the Center for Social Development (CSD), reiterates the need to increase the volume of assistance to business.

“The business often states the need for full-wage subsidies and the abolition of taxes (including VAT) for the next six months (and these measures are also necessary for those industries that have not been supported yet),” she says.

Nakoryakova also notes that businesses may require direct assistance from the state to maintain the number of employees.

“Providing direct gratuitous assistance to enterprises so they can pay wages is one of the most popular measures of state support for businesses (as shown by the results of the monitoring of the CSD),” she says.

According to Ostapkovich, a surge in unemployment and a decline in real disposable income are the main problems the Russian economy may face in the period when restrictive measures are gradually lifted. He stresses that these indicators are much more important than the indicator of GDP decline, which can be compensated in 1-3 years.

“The main problem is not how GDP will fall, but there are four main indicators: unemployment, real disposable income, welfare, and income inequality. The main thing is to control these indicators,” he said.

Alisen Alisenov from RANEPA also agrees that due to quarantine the unemployment rate in Russia may increase significantly.

“The total number of unemployed will increase with the extension of quarantine measures and may grow from 4 million to 7 million people, if the restrictions are in force until June 1, 2020. The unemployment rate may jump from the current 4.6% to 10%,” he says.

According to him, this may require additional funds to pay unemployment benefits.

“The need to pay unemployment benefits will increase significantly since the planned funds for these purposes were calculated taking into account 2.5 million people,” Alisenov said.

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