With most of the country under strict lockdown, Russians upset with president Vladimir Putin’s handling of the coronavirus pandemic took to the streets virtually on Monday by tagging angry comments to government buildings on Yandex. Maps, Russia’s most popular navigation app.
“Putin out!” one user wrote on Moscow’s Kremlin before Yandex deleted the messages. “People are going to start dying of hunger!” said another, pointing to Russia’s piecemeal support for people struggling to make ends meet during quarantine.
Mr Putin maintains the situation is “totally under control”, but the reality of Russia’s economic predicament is rapidly becoming clear as coronavirus cases continue to tick up.
Though Russia has a $165bn cushion of savings built from its oil and gas wealth, the Kremlin has been reluctant to spend it during a collapsing oil market that has turned its most important revenue stream to a trickle.
Mr Putin’s hesitation has trapped Russia between the need to increase state spending to mitigate the fallout from the pandemic and maintaining existing budgetary promises key to his plans to potentially stay in power until 2036.
Public confidence in Mr Putin’s administration shows signs of waning. Levada Center, Russia’s last independent pollster, said Mr Putin’s approval ratings fell to 63 per cent in March, the lowest since November 2013.
“[The government] think that people have cushions and can cope with having no income for one or two months,” said Sergei Guriev, a professor of economics at Sciences Po in Paris. “You really need a disaster to wake Putin up. He seems to be operating normally, and that’s scary.”
Much of the public criticism has focused on the limited Rbs2tn ($26bn) government support package, which pales in comparison to those rolled out by other European countries.
Russia now has almost 60,000 cases of the virus and a death toll of over 500 people, while the national lockdown instituted on March 28 has pushed small businesses to the point of collapse. Moscow’s unemployment rate has risen 45 per cent in the past three weeks.
In his public address on Sunday to mark Orthodox Easter, Mr Putin said that “all levels of government are working in a streamlined, orderly and responsible manner . . . Our whole society is united in front of a common threat.”
The next day, police were sent to break up a protest in Vladikavkaz, a city in southern Russia, against job losses. Protesters were also demanding more unemployment compensation than the local government’s $40 handout.
Officials have said the rescue package, equivalent to 2.8 per cent of GDP, could be equivalent to 6.5 per cent of GDP when combined with deficit spending.
But most of the stimulus has come from tax holidays and loan guarantees. The actual state injection of funds may be as small as 340bn roubles, or 0.3 per cent of GDP, according to Natalia Orlova, chief economist at Alfa-Bank.
The Kremlin “still intends to spend as little as possible while being able to officially refer to a substantial rescue package,” Ms Orlova said in a note to clients on Tuesday.
Instead, oligarchs and big businesses have been providing cash donations and purchases of medical equipment to support communities where their industrial assets are located.
While the rising number of Covid-19 cases is cause for concern, the bigger worry is the collapse in oil prices, which briefly turned negative in the US this week. Oil and gas revenues account for over 40 per cent of Russia’s federal budget and almost half of total government spending.
“Russia is between a rock and a hard place: It is an oil exporter and close to 50 per cent of the consolidated budget could go to zero. So of course they are being cautious in terms of spending promises,” said Elina Ribakova, deputy chief economist at the Institute of International Finance.
The IMF has forecast that Russia’s economy could contract by 5.5 per cent this year as domestic lockdowns are extended and global demand for its raw materials exports collapse.
A deal between Russia, Saudi Arabia and other members of the Opec group of oil producing countries struck this month to reduce crude output was intended to prop up prices, but the Brent crude benchmark has fallen 40 per cent since then as global demand has collapsed.
“There has been a dramatic shift in rhetoric in recent weeks. The focus was previously on the oil negotiations hoping that would solve everything,” Ms Ribakova said. “That was a sidetrack that distracted from the truth that there is an unconstrained spread of coronavirus in Russia.”
“Until we have clarity on [the scale of the outbreak], they don’t know the right balance between keeping the economy open and closing it down,” she added.
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Russia has been reluctant to tap the $142bn of liquid assets in its national wealth fund, squirrelled away since 2017 from surplus oil and gas revenues. That will instead be spent on filling the gaping hole in the budget, which is balanced on a $42 per barrel oil price — more than twice the current one.
In a sign of how strained the economy has become, finance minister Anton Siluanov said this week that the nest egg would only last until 2024, four years earlier than estimated just a few weeks ago.
Several experts say the limited direct government spending may be insufficient to alleviate Russians’ pain from the collapse. In a report published by the Liberal Mission foundation, a group of liberal economists called on the Kremlin to tap the national wealth fund for direct payments to citizens as well as subsidies for small businesses to pay rent and salaries.
“The dark days are here, but [Putin] thinks these days will last for a long time . . . so [he] wants to spend it over the next two or three years,” said Mr Guriev, one of the report’s signatories.
Source: Financial Times