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8 Nov, 2020 13:54

Russian economy to cope with coronavirus shock better than expected – European Commission

Russian economy to cope with coronavirus shock better than expected – European Commission

The European Commission has improved its forecast for the Russian economy, while downgrading its global outlook, as the coronavirus crisis continues to batter the world economy.

Russia’s gross domestic product (GDP) is set to shrink by 4.2 percent, according to the EU’s latest economic forecast, released earlier this week. This is 0.8 percent less that the body predicted in the Summer 2020 Economic Forecast. Next year, the Russian economy is expected to expand more than previously thought – by two percent instead of 1.6 percent. As for 2022, the commission expects Russia’s GDP to rise by 1.9 percent.

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While the recent forecast for 2020 is almost similar to the updated outlook by the International Monetary Fund (IMF), it is still slightly gloomier than Russia’s own expectations. In September, the country's Ministry of Economic Development revised its assessment of the coronavirus’ impact on the economy, now forecasting a 3.9-percent contraction instead of five percent.

The European Commission warns that the EU and global economies are still prone to an “extremely high degree of uncertainty and risks” due to the resurgence of the virus. The recent developments have resulted in a downward revision of its global economic forecast. This year, global GDP is expected to tumble by 4.3 percent against a 3.5 percent drop outlined in the spring economic outlook. In 2021, the global economy is set to bounce back and expand by 4.6 percent – 0.6 percent less that the commission previously predicted.

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“In short, we never counted on a ‘V-shaped' recovery. Now we know for sure that we will not have one,” said Commissioner for Economy Paolo Gentiloni. He also stressed that, despite the recent “very strong upswing” from the historic plunge seen in the first half of the year, another wave of Covid-19 has interrupted Europe’s rebound.

“Growth will return in 2021, but it will be two years until the European economy comes close to regaining its pre-pandemic level,” he added.

A worsening of the coronavirus pandemic remains a major risk for the future of the European economy. A more pessimistic scenario implies that “scars” left by the virus may be “deeper and farther reaching,” including bankruptcies, long-term unemployment and supply disruptions.

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