Due to the COVID-19 pandemic, the outgoing year of 2020 was unprecedented. The world economy and, the Russian economy as well was in shock. The pandemic hit every industry in the Russian economy. First of all, companies from the service sector suffered the most: cafes, bars and restaurants, beauty salons, travel agencies, fitness clubs, dry cleaners, hotels, shopping malls and entertainment centers.
At the end of 2020, Russia's GDP decreased by 3.1%. The volume of Russia's GDP for 2020 amounted to 106.606 trillion rubles at current prices. The GDP physical volume index relative to 2019 amounted to 96.9%. The GDP deflator index for 2020 in relation to the prices of 2019 was 100.7%.
The value added in the industries oriented towards public services has significantly decreased: hotels and restaurants (- 24.1%), cultural and sports institutions (-11.4%), transport enterprises (- 10.3%), other services (- 6.8%). The unfavorable export situation and the decline in energy prices influenced the decrease in the index of the physical volume of value added in the extractive industry (decline by 10.2%).
An increase in gross value added was in the field of finance and insurance (by 7.9%), in the public administration and military security; social security (by 2.5%), health and social services (by 0.3%) and IT sector (by 0.2%).
Oil industry:
The most important thing of the year in the oil industry was a decline in OPEC + oil production in May by as much as 9.7 million b / d, although even earlier, during the periods of past crises, production was cut by a maximum of 4 million b / d. This was a response to a fall in oil prices, which in March and April of this year dropped even to $ 26 per barrel - that is, to the lows of the beginning of the 21st century.
In 2020, significant changes took place in the infrastructure of the oil market. Thus, OPEC + was transformed in 2020, in fact, into "OPEC ++", since a number of oil-producing countries that were not previously part of either OPEC or OPEC + (Canada, Norway and some other countries) joined the reduction in oil production. The collapse in oil prices, which reduced the incomes of the exporting countries, forced these countries to unite in order to prevent an oversupply. The reformed OPEC+ has proven its effectiveness this year, as oil prices almost doubled from April to December 2020.
Gas industry:
Despite new sanctions by the US Congress and the refusal of the Norwegian company DNV GL to certify the Nord Stream 2 gas pipeline, construction of the pipeline resumed in December 2020. The issue of certification of the gas pipeline is still open, but, apparently, Germany will not deal with this issue until the completion of the gas pipeline, and the construction of the Danish almost 100-kilometer section may take at least another 2-3 months, depending on the weather.
Industry and retail sector
By the end of 2020, the manufacturing industry showed moderate growth (+ 0.3%). Manufacturing output exceeded 2019 levels by 1.1% YoY, and there was the highest growth in December since March by 4.4% YoY. In 2020, the growth drivers remained the chemical complex (+ 8.8% in 2020, including pharmaceuticals: + 23.0%), FMCG industry (+ 3.1%) and light industry (+ 1.1%).
The PMI index of the manufacturing industries of the Russian Federation in December 2019 rose to 47.5 points, according to a study by IHS Markit. In November, the indicator was at the level of 45.6 points.
Service sector:
Amount of services provided at the end of the year decreased by -17.3%. Despite a gradual improvement in the second half of the year, the indicator remains well below the 2019 levels. The decline in catering turnover in 2020 amounted to -20.7% YoY.
The seasonally adjusted PMI for the Russian services sector reached 48 in December, indicating a moderate decline in business activity among Russian service providers. The drop in production was driven by weaker customer demand and a further decline in new sales.
Labor market:
Labor market reacted to the economic situation by increasing unemployment rate. The number of employed decreased by 1,331.7 thousand people (-1.9% yoy) and amounted to 70.6 million people. The total number of unemployed (according to the methodology of the International Labor Organization) increased by 857.5 thousand people (+ 24.7% YoY) and amounted to 4.3 million people. In January-November, the growth of nominal wages amounted to 5.5% YoY, in real terms - an increase of 2.2% YoY.
International trade:
In January-November 2020, Russia's foreign trade turnover amounted to USD 511.4 billion and, compared to 2019, decreased by 16.3%. The trade balance was positive of USD 92.7 billion, which is USD 69.2 billion less than in 2019.
Russian exports in January-November 2020 amounted to USD 302.0 billion and decreased by 21.8% compared to January-November 2019. Far abroad countries accounted for 85.5%, CIS countries - 14.5%.
The basis of Russian exports in January-November 2020 was traditionally fuel and energy products, the share of which in the commodity structure of exports amounted to 50.4% (2019 - 62.7%).
Inflation and Monetary Policy:
At the end of December 2020, inflation in annual terms was 4.9% YoY (compared to 4.4% YoY in November and 3.0% YoY in 2019). As compared to the previous month, the growth in prices increased (to 0.83% mom from 0.71% mom in November). An increase in world prices for key food products led to the growth of consumer prices for a number of socially important goods (sugar, sunflower oil, flour, pasta and bakery products) and fruits and vegetables.
Moscow Exchange:
By the end of December, the Moscow Exchange Index rose 4.5% to 3289.58 points. This was primarily due to the growth in the global stock and commodity markets against the background of news about the registration of vaccines from "covid" in the US and Great Britain.
The absolute leader of growth in December in the oil and gas sector was the shares of Gazprom, which went up in price by 15.3%, which turned out to be slightly less than in November. In December 2020, the total trading volume on the Moscow Exchange markets grew by 36.0% and amounted to 90.2 trillion rubles.
Epidemiological situation:
Since the beginning of December, 70 Moscow polyclinics have begun to vaccinate against COVID-19. Citizens from the main risk groups, who meet large number of people, can get vaccinated. We are talking about doctors, as well as employees of educational and social institutions. Moscow Mayor Sergei Sobyanin said that 6-7 million Moscow citizens should be vaccinated against coronavirus. The mayor also promised to unblock social cards for students and retirees vaccinated against the coronavirus.
On average, 27-29 thousand new cases of coronavirus infection were recorded in December. The effectiveness of the Russian vaccine against coronavirus "Sputnik V" in the final third test checkpoint was 91.4%.
Restrictive measures no longer cause widespread public support. For example, St. Petersburg bars and cafes created the "Map of Resistance" after the ban on work on New Year's holidays. Several dozen establishments are marked on the map, opposing the resolution of the city administration. According to him, from December 30 to January 4, all catering establishments are prohibited in the city due to the coronavirus pandemic. In addition, from 25 to 29 December and from 4 to 10 January, cafes and bars will not be able to receive visitors from 7 pm to 6 am.
Based on the above information, we see the greatest prospects for the development of cooperation and attraction of investments in the following industries:
- Infrastructure (support of Russian infrastructure by the New Development Bank; development of the Strategy for Spatial Development of Russia in 2025, which will open up opportunities for investment);
- Pharmaceuticals (simpler rules for registration of drugs and the sales market is guaranteed by the state);
- Medical industry (import substitution policy and sales guarantees by the public sector of the economy through public procurement);
- Oil and gas sector (growth in oil production, expected under the OPEC + agreements, forecasts for maintaining prices for 2019);
- Agriculture (extension of the food embargo and further government support for domestic producers);
- Mechanical engineering (allocation of subsidies and good prospects for export);
- Construction and real estate (decrease in the cost of funding and growth in demand due to economic recovery).