## IMF Executive Board Concludes 2020 Article IV Consultation with the Russian Federation

_IMF News, February 9, 2021_

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## Bibliographic details
- Published: February 9, 2021

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### Overview
- Press Release No. 21/36; February 9, 2021.
- The Executive Board concluded the Article IV consultation with the Russian Federation.
- Russia entered the COVID-19 crisis with low growth but strong policy frameworks and significant buffers: disciplined fiscal policy since 2014, low public debt, reserve accumulation, introduction of inflation targeting and significant de-dollarization.

### Economic impact of COVID-19 and policy response
- Economic contraction and resilience:
  - "The Russian economy, which contracted by 3.1 percent last year (less than the 3.6 percent contraction projected in the Staff Report), has proven more resilient than many other emerging economies."
  - Contributing factors to resilience: relatively small service sector, large share of protected public employment, COVID-related restrictions that excluded much of the industrial sector.
- Policy response:
  - Fiscal support around 4.5 percent of GDP targeted at the health sector, vulnerable households and the unemployed, and systemically important firms and firms in the most affected sectors.
  - Monetary policy: policy rate cut by 200bps to a record-low 4.25 percent; introduction of new liquidity instruments; liquidity support to banks; capital buffers released; regulatory forbearance on loan classification and provisioning.
  - External and price effects: low oil prices and geopolitical tensions triggered exchange rate depreciation and some increase in inflation; current account surplus narrowed on low oil prices and weak oil demand.

### Outlook and scenarios
- Recovery projection and drivers:
  - "The ongoing recovery is projected to accelerate towards the middle of 2021 as the second wave of the pandemic recedes, COVID-19 vaccines become widely available, and oil production cuts are tapered in line with the OPEC+ agreement."
  - Authorities intend to withdraw fiscal stimulus as conditions improve.
- Uncertainties and risks:
  - Downside risks: spillovers from strict containment measures in key trading partners; geopolitical risks.
  - Upside possibility: effective vaccine availability reducing the risk of a protracted pandemic; possible confidence effects and pent-up demand leading to stronger-than-projected recovery.
  - "An effective vaccine rollout will be key."

### Executive Board assessment and policy recommendations
- General assessment:
  - Directors commended the sizeable policy response which should help limit scarring and put a floor on the downturn.
  - Short-term risks remain tilted to the downside given the global pandemic situation and geopolitical tensions.
- Fiscal policy guidance:
  - Allow for withdrawal of fiscal support as recovery takes hold, but remain vigilant and ready to extend support if needed.
  - Welcomed decision to keep the maximum unemployment benefit at its post-March level; suggested considering doing likewise for all unemployment benefits until employment improves, while removing disincentives for formal sector work.
  - Should downside risks materialize, use substantial fiscal space to deploy stronger support.
  - Commended growth-friendly tax reforms (e.g., permanent reduction of the payroll tax for SMEs) and better targeting of social assistance.
  - Recommended gradually phasing out domestic fuel consumption subsidies while cushioning impacts on vulnerable groups.
- Monetary and financial sector guidance:
  - Welcomed monetary loosening in 2020 and new liquidity instruments.
  - Saw room for additional monetary accommodation amid significant economic slack to prevent inflation from sliding below target as one-off shocks dissipate; nevertheless generally saw merit in authorities’ wait-and-see approach.
  - Underscored appropriateness of foreign exchange operations to address disorderly market conditions and recommended separating these clearly from operations under the fiscal rule.
  - Banks: welcomed significant buffers; crisis-related losses should not pose a system-wide capital threat. Called for close tracking of restructured loans while forbearance remains in place. Forbearance should not be extended as it obscures true bank health.
  - If provisioning pushes banks’ capital below regulatory minima, sound and solvent banks could be allowed extended time to restore capital.
  - Welcomed legislative efforts to expand the Bank of Russia’s macroprudential toolkit.
  - Noted progress in Russia’s AML/CFT framework but called for further effective steps to address remaining risks.
- Structural reform priorities:
  - Increasing potential growth and reigniting income convergence requires far-reaching structural reforms: reduce state footprint, improve business climate, increase competition, address governance shortcomings, reduce regulatory burden.
  - Emphasized using national projects as an opportunity to tackle structural bottlenecks.

### Selected macroeconomic indicators (highlights from 2017–26 table)
- Real GDP (Annual percent change):
  - 2017: 1.8
  - 2018: 2.5
  - 2019: 1.3
  - 2020: -3.6
  - 2021 Projection: 3.0
  - 2022 Projection: 3.9
- Real domestic demand (Annual percent change):
  - 2019: 2.2
  - 2020: -5.8
  - 2021 Projection: 5.1
- Consumption (Annual percent change):
  - 2019: 3.5
  - 2020: 2.9
  - 2021 Projection: -6.2
  - 2022 Projection: 5.6
- Investment (Annual percent change):
  - 2019: -1.6
  - 2020: 3.2
  - 2021 Projection: -5.0
- Consumer prices, period average:
  - 2017: 3.7
  - 2018: 4.5
  - 2019: 4.3
  - 2020: 4.0
- Output gap (percent of potential GDP):
  - 2019: -0.2
  - 2020: -3.0
  - 2021 Projection: -1.4
- Public sector, General government revenue (Percent of GDP):
  - 2017: 33.4
  - 2018: 35.5
  - 2019: 35.8
  - 2020: 34.6
  - 2026 Projection: 33.6
- General government expenditures (Percent of GDP):
  - 2017: 34.8
  - 2018: 32.6
  - 2019: 39.2
  - 2020: 36.7
- Net lending/borrowing (overall balance, Percent of GDP):
  - 2017: -1.5
  - 2018: -4.6
  - 2019: -2.3
  - 2020: -1.2
  - 2026 Projection: -0.8
- Non-oil primary balance (Percent of GDP):
  - 2017: -8.4
  - 2018: -6.6
  - 2019: -10.3
  - 2020: -7.1
- Gross international reserves (Billions of U.S. dollars):
  - 2017: 432.7
  - 2018: 468.5
  - 2019: 554.4
  - 2020: 583.4
  - 2026 Projection: 624.0
- Nominal GDP (billions of U.S. dollars):
  - 2017: 1,575
  - 2018: 1,653
  - 2019: 1,689
  - 2020: 1,431
  - 2026 Projection: 1,893
- Real per capita GDP, PPP dollars:
  - 2017: 25,999
  - 2018: 26,677
  - 2019: 27,041
  - 2020: 25,978
  - 2026 Projection: 30,324
- Exchange rate (rubles per U.S. dollar, period average):
  - 2017: 58.3
  - 2018: 62.8
  - 2019: 64.6
  - 2020: 72.3
  - 2026 Projection: 80.7
- Brent oil price (U.S. dollars per barrel):
  - 2017: 54.4
  - 2018: 71.1
  - 2019: 64.0
  - 2020: 42.3
  - 2026 Projection: 49.4

*IMF Press Release No. 21/36; February 9, 2021.*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [Russian Federation and the IMF](http://www.imf.org/external/country/RUS/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2021/02/08/pr2136-russia-imf-executive-board-concludes-2020-article-iv-consultation_