Covid-19 pandemic tanks Russian economy, plunges families into crisis

As countries across the globe has been facing the worst collective economic downturn since the Great Depression, Russia seems to be particularly hard hit by the twin blows of the coronavirus pandemic as well as the collapse in oil prices.

Russia relies on taxes from the oil and gas sector for 40 per cent of its budget.

The Washington Post reported that Russian charities and non-profit organisations, since March, experienced a surge in the kind of clients they have not had before -- families that had never been in financial crisis, but are now desperate. Some of them were unable to buy even food. Some were left homeless.

According to Russian federal statistics agency, Rosstat, an estimated 4.5 million people were out of work at the end of May -- a number that has soared 85 per cent since March. Before the double crises hit, Russia had 1.3 million people listed as unemployed, according to official figures.

The jobless rate now stands at 6.1 per cent, compared with 5.8 per cent in April. In the United States, the unemployment rate in June was 11.1 per cent, the Bureau of Labor Statistics reported, down from a peak of 14.7 per cent in April.

In May, Russia’s industrial output slumped by 9.6 per cent compared with May 2019 as restrictions on oil production under a deal with OPEC hit home. The auto-manufacturing industry was particularly hard hit, down by 42.2 per cent in May compared with the same period last year.

The International Monetary Fund (IMF) expects the Russian economy to contract by 5.5 per cent this year. The Russian Central Bank said that it could shrink by up to 6 per cent. In comparison, the US economy shrank at a 5 per cent rate in the first quarter of this year, the Commerce Department reported in late June.

Thousands of small businesses in Russia have gone bankrupt. The government was slow to respond and belated, patchy measures left millions of people adrift.

“You are on your own,” said Ivan Molchanov, a welder who spent 20 nights on the streets after his employer suspended operations and stopped paying both his 75,000-ruble monthly salary (about USD 1,070) and his accommodation in a cheap workers’ hostel.

Yekaterina Gorbunova, her husband, Alexander and their four children lost nearly everything. She even wrote to President Vladimir Putin and the office of Moscow’s mayor asking for help getting an apartment. But no help came in time.

“We feel absolutely abandoned. It is as if you are in a boat and it is sinking. No one will come to rescue you,” she said after her husband lost his job and the family was evicted from their apartment.

“Nobody pays any attention to the people in need. Instead of doing good, no one cares,” she added.

As Russia has eased its isolation period, some people have returned to work, including the beautician and the chef. But many small businesses have closed and many jobs have been lost.

Putin has often promised to support families with many children, but many feel abandoned. During the crisis, families have received payments of 10,000 rubles (USD 142) per month for each child younger than 16, but Gorbunova said that the payment does not cover a week’s worth of expenses, even without rent.

“All families with many children feel that way,” she said.

“President Putin is a nice person. But as very often happens, a fortress is broken on the inside. There are worms burrowing inside the fortress,” she added.

The number of Russians filing for bankruptcy protection in the first quarter increased 68 per cent over the same period last year, according to RBC news, with at least one million Russians predicted to declare bankruptcy in coming months.

But even as many middle-class families and small businesses struggle, it is tougher for vulnerable families, homeless people and low-income people, many of whom do informal work in the “gray economy,” a category excluded from government help.