After Coronavirus: Russian Productivity Expected To Triple From 2019

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Op/Ed by Chris Devonshire-Ellis

Regional economic growth in developing Eurasia will decline sharply in 2020 due to the effects of the novel coronavirus (COVID-19) pandemic, before recovering in 2021, according to the Asian Development Outlook (ADO) 2020, the Asian Development Bank’s (ADB) annual flagship economic publication.

The Asia Development Banks largest shareholders are the US (15.6% of total shares), Japan (15.6%), China (6.4%), India (6.3%), and Australia (5.8%).

The report forecasts regional growth of 2.2 percent in 2020, a downward revision of 3.3 percentage points relative to the 5.5 percent ADB had forecast in September 2019. Growth is expected to rebound to 6.2 percent in 2021, assuming that the outbreak ends, and activity normalizes. Excluding the newly industrialized economies of Hong Kong, China, South Korea, Singapore, and Taiwan, developing Asia is forecast to grow 2.4 percent this year, compared to 5.7 percent in 2019, before rebounding to 6.7 percent next year.

The report doesn’t cover Russia, although it does cover several of the countries in the EAEU as well as Central Asia and China’s Belt & Road Initiative. Our summary of the banks report concerning this can be read in the article “After the Coronavirus: The Belt and Road Initiative Economic Recovery, 2020-2021.”

However, both Fitch Ratings and Standard & Poors have released data projections for Russia, stating that GDP growth will decline to 1% in 2020 before recovering to 3.8% in 2021. That represents a tripling of economic output compared with last year.

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However, the Bank is far less optimistic for the chances of an immediate rebound from COVID-19 in the West, with growth stagnating or contracting in the major industrial economies of US and Europe. Other analysts, such as Fitch, take a similar view.

cb_gdp-growth-rate-and-inflation-per-year

These economies are taking a distinct hit and post-COVID-19 will emerge with bankruptcies, little available investment capital, and large numbers of unemployed. This means that companies will need to look for cheaper alternatives to produce much-needed manufacturing products in order to stimulate Western consumer demand. That production requirement will be met by China and the other emerging economies in Asia. To keep pace, EU manufacturers should be dusting off sanctions rules, evaluating what they can do, and re-evaluating Russia manufacturing investments into the country now. With an upcoming decision due on tariff reductions due to the China-EAEU Free Trade Agreement signed off last year, Russia may also act as a lower cost manufacturing springboard into China. Such geopolitical issues need to be revisited – surprises are in store.

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About Us

Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Through our membership of the Leading Edge Alliance, we also have partner firms throughout Africa and have numerous Russian and African clients. For enquiries please contact us at russia@dezshira.com or visit us at www.dezshira.com

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