Russia faces twin hits from COVID-19 and cheap oil

Significance

The steep fall in global oil prices and rapid spread of COVID-19 have ended hopes of economic revival in 2020. The government has allocated 300 billion rubles (4 billion dollars) for immediate use, and Putin has announced hefty taxes on the rich to boost revenues. The Central Bank of Russia (CBR) has no plans for monetary expansion but will provide additional liquidity to the banking sector and relax regulations to encourage credit for badly hit industries.

Impacts

• A temporary hike in inflation is expected due to ruble devaluation and possible price hikes on some products.
• The government will make regulatory changes to ensure food supplies.
• The deteriorating economic situation is likely to spur higher capital outflows.
• Poorer regions are likely to receive additional funding from Moscow.