In Russia there are currently signs of serious shifts. In the coronavirus crisis, Putin has not fulfilled the hopes of many. The COVID-19 pandemic that struck in the beginning of 2020 has claimed hundreds of thousands of lives, and it is still unclear what the consequences of the virus will be for those who have already recovered from it. The economies of practically all countries around the world are suffering from the consequences of the global pandemic. The incomes of a large number of people have decreased and governments have been forced to invest large amounts of money in healthcare. This has accompanied cuts in government spending in other areas such as education, science, and the arts. The responses to the crisis have mainly been national. In many countries, governments did not supply direct financial support to their citizens, which led to the worsening of many domestic political situations.
According to experts, an example of this is Russia. So, let’s now look at Russia as a case study. Experts at the Institute of the Russian Academy of Sciences for Economic Forecasts recently presented their forecast on the development of the Russian Federation’s economy for the next few years. According to their estimates, the economy of the Russian Federation will shrink by 5.3 percent in 2020, followed by 3 percent growth in its recovery phase during 2021. Investments will fall by 7.4 percent in 2020.
Boris Guseletov is a senior researcher at the European Institute of the Russian Academy of Sciences and a member of the Scientific Advisory Board of the Russian Academy of Sciences. This article first appeared in maldekstra #8 and was translated by Nathan French.
The chief economist of the development bank VEB, Andrei Klepatsch, former Vice-Minister for Economic Development of the Russian Federation, believes that the pandemic and the collapse of oil prices will continue to be a challenge for the Russian economy in the coming years. Many companies have put their financial activities on hold. This is especially true for small- and medium-sized businesses. The impact of the pandemic on the economy will be ten times stronger in 2020 than the impact of falling oil prices. In the long term, the Russian government’s restrictive measures will have a negative impact on health care, transport, education as well as other sectors.
Russia’s financial system has suffered considerable damage due to the pandemic. The Ministry of Finance was forced to increase the internal debt in order to cover the budget deficit which reached about 10.6 percent of GDP. Most regions are facing serious consequences of the COVID-19 pandemic for their budgets. Since April/May 2020, revenue has fallen and continues to fall dramatically in 80 percent of regions, while spending to combat the effects of the pandemic has increased. Forty percent of the regions have to cover substantial budget deficits (the total is 245 billion roubles). The number of these regions and their overall deficit continues to rise.
The Russian health care model, as it has evolved since 2012, has proven to be inefficient and the government was forced to change this quickly. The optimization of the health care system included a drastic reduction in the number of hospital beds, as well as a reduction in the number of doctors, mid-range medical staff, and nurses, who at the same time had to bear a greater burden. The network of regional hospitals and clinics as well as the capacities for emergency aid were reduced to a considerable extent. Despite the declared prioritization and the increase in physician salaries, budget spending on health care fell from 3.9 percent of GDP in 2007 to 3.3 percent in 2019. According to experts, the financing of this sector must be increased by at least 1–1.5 percent of GDP by 2024.
Falling incomes and growing unemployment as a result of the COVID-19 pandemic have hit Russian citizens hard. Prime Minister Mikhail Mishustin recently declared that the corona crisis threatens the successes in the fight against poverty achieved through decades of work. It is clear that poverty in the country will increase in 2020. Today some 18 million people in Russia live below the poverty line, or 12.3 percent of the population. The surveys show that citizens are sceptical about the prospects for their material situation. This pessimism of consumers can lead to a serious crisis in consumption. Around 70 percent of those surveyed believe that the pandemic will have a significant impact on the country’s economy. Eighteen percent speak of a moderate influence.
Against the backdrop of falling incomes, unemployment in Russia continues to grow. The head of the Ministry of Labour and Social Security, Anton Kotyakov, considers the situation on the labour market to be very tense: there are 18 applications for every ten vacancies in Russia. According to data from the Russian Statistics Office, the number of unemployed rose by 815,000 in April 2020 compared to March, amounting to 4.3 million. The President of the Confederation of Labour (KTR), Boris Kravchenko, declared that the real unemployment rate was significantly higher than these official figures. He speaks of eight million unemployed.
Unfortunately, at the most difficult time of the crisis (from March to May 2020), the government of the Russian Federation did not provide comprehensive financial aid to the majority of citizens who lost their jobs and income. It limited itself to allocating small grants to families with children (10,000 roubles which is about 150 euro per child), making the procedure for obtaining these grants much more difficult. Small and medium-sized enterprises, which were most affected by this crisis, did not receive any real financial help either. They were given deferrals of tax payments and allowed to take out loans with favourable interest rates in order to pay wages to their employees.
In early June 2020, an independent research group presented a report analyzing the political mood in Russian society. The study presented the most important segments of political thought that have formed in Russian society. Which ones are they?
First, the “loyalists”: these include the “followers of the great power”. Ideologically they are close to the opposition, but for them the state power still embodies the strength of the country. Many of them were formerly in the military. They view the “liberals” and “democrats” negatively, but are not prepared to actively oppose them. In addition, they are “particularly elderly people” over 75 years of age. They spent their childhood during the war and in the post-war years. They know that the situation in Russia also be worse. They will not take part in protest actions or movements in support of the ruling class. Furthermore, the “keepers of the status quo” can be counted among this group, people who have adapted to the current situation. They are afraid of any change that could worsen their situation. Their ideology is a conservatism based on a fear of change. They are not a real political force.
Second, there are the representatives of the oppositional part of the social and political spectrum. Their positions in society are gaining more importance today. Four relevant groups can be identified among them: the “democratic opposition” consists of supporters of democratic values, a developed civil society, opponents of political manipulation and illegal violent actions by the state. The particularly active among them are willing to participate in street protests. Another group is the “followers of leftism and values of social justice”. They support alternative candidates and opposition parties in elections. Today, they join the “Democratic Opposition” in the fight against increasing pressure and monopolization of power and advocate a change of socio-economic course and a related political turnaround. There are also “non-political” parties, a segment that lies between the extreme ideological poles. The inefficiency of power and fatigue in the face of its immutability push it toward opposition. Finally, there are “former Putin supporters” who are disappointed in him. Their ideology is mainly determined by Russian nationalism, further by imperial moods and a negative relationship to Western democracy. These people want a “strong hand” to make the country “great again”.
One can therefore conclude that Russian society is undergoing many serious shifts. The trend towards a negative attitude with regards to federal power, which began as early as 2011 and revived after the “Crimean Window” in 2018, was significantly intensified by the pandemic. The predominant emotions of many people are anger, restlessness, and rage. The most important object of negative remarks was Putin, who “did not live up to the hopes”.
A significant number of citizens believe that the current situation could cause serious socio-political upheavals. The outbreak of dissatisfaction among citizens, something Russia has not experienced in almost 30 years of post-Soviet history, as well as the growing helplessness and cynicism of politicians, are evidence of the possibility of the most negative scenario imaginable. The recent mass riots in Khabarovsk, triggered by the arrest of the elected governor Sergei Furgal, provide proof of this. Representatives of very different currents took part in this event. They demonstrated an unprecedented solidarity and unity for the idea of fundamental changes to Russian society.