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Moscow Quarantine: Possible Consequences
March 31, 2020 00:48


A quarantine week in Moscow costs the city’s economy 75-112 billion rubles. The regime of restrictions kills the projected economic growth for this year and negatively affects the income level of Muscovites. If quarantine lasts longer  than two or three weeks, the capital may face a surge in unemployment.

Moscow Mayor Sergei Sobyanin announced the signing of a decree that introduces a regime of complete self-isolation in the capital. Residents are not recommended to leave their apartments without urgent need. As of March 31, 1613 out of 2337 cases of coronavirus registered in Russia fall to Moscow. On the days that President Vladimir Putin declared non-working (March 28 - April 5), in Moscow, as well as throughout Russia, all stores are closed, except for grocery and drugstores, while restaurants and cafes operate only for take-away and delivery.

A quarantine week for the Moscow economy will cost 0.4-0.6% of GRP (gross regional product) in annual terms,  Maxim Pershin, an expert in the ACRA regional rating group estimates. GRP of Moscow amounted to 18.774 trillion rubles in 2019. Thus, losses can be, according to rough estimates, from 75 billion to 112.5 billion rubles per week. “Figures calculated in this way will be slightly underestimated because they do not take inflation into account,” Pershin says. Obviously, the services sector will suffer the most, he continues: the tourism services sector will shrink by 100% during the isolation period, the public services sector, including catering and passenger transportation, will be halved or more, trade and manufacturing will be reduced by 15-25%.

“In Moscow, the share of services and trade sectors is traditionally large, and restrictive measures will lead to large losses of GRP. An unfavorable situation in the global economy will become an additional constraining factor for the return of GRP to the levels of the previous year,” the analyst adds.

For the Moscow budget, the most painful will be a decrease in activity in the wholesale and retail sectors, which accounted for almost a quarter of tax revenues in 2019. The second most important is the financial sector, which last year brought 362 billion rubles to the capital budget in the form of taxes, Andrei Piskunov, the managing director of the rating group of the NKR agency’s authorities says. In total, according to the assessment of the city authorities, the tax budget revenues for 2019 exceeded 2.3 trillion rubles.

Other industries where companies had to stop working occupy a relatively small share in the capital's tax revenue structure. In particular, the hotel and restaurant business provides less than 1% of Moscow taxes, Piskunov says.

Loss of physical volume of GRP per week can be approximately 0.3%, Forbes chief economist at Alfa Bank Natalia Orlova says. The socio-economic forecast of Moscow, on the basis of which its budget for 2020-2022 was drawn up, suggested that in 2020 the Moscow economy will grow by 2.3%. Thus, the quarantine week “eats up”  0.3 percentage points of this value. “Small and medium-sized companies will be able to survive the quarantine for two or three weeks, and not dismiss workers. That is, in the short horizon, the main blow will be on the incomes of the population,” she said.

If quarantine lasts longer than two to three weeks, then the risks of rising unemployment will increase significantly. The main affected segment will be trade, which employs about 3 million people. Construction and the real estate sector, where a comparable number of people work, will also suffer.

On March 29, a decree of the Moscow Mayor was published, according to which the total amount of payments that unemployed Muscovites will receive from April 1 to September 30 will amount to 19,500 rubles a month. This money will be paid to those who have worked at least 60 calendar days this year. Over the first day, more than 10,000 people applied for unemployment benefits.

Author: Anna Dorozhkina

Tags: coronavirus Russian economy    

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