Izvestia: Coronavirus pandemic irreversibly destroying world trade

Global trade continues to decline rapidly, falling even faster than global GDP, with forecasts showing it to be the worst recession in 80 years. The coronavirus pandemic and quarantine did not change global trends, but rather strengthened existing ones, taking the lead from the US-Chinese trade wars and numerous manifestations of protectionism and economic nationalism. According to Izvestia, there is no reason to believe that something will change when the pandemic fades away.

The IMF and the World Bank expected that things would get better in 2020. However, all forecasts turned out to be meaningless due to the pandemic, the newspaper wrote.

According to the WTO’s forecast, even under an optimistic scenario (a rapid post-crisis recovery in the second half of 2020), world trade would still decline by 13%, a record not seen since the early 1980s. And if the pandemic is not quickly brought under control or a second wave occurs, then the fall will amount to a catastrophic 32%. The most serious damage will be seen in sectors with complex production chains, as well as in a number of services.

In addition, countries began introducing additional measures to limit trade, though related more to export bans than import tariffs. Some of these measures will be lifted after the end of the pandemic. However, there is every reason to believe that many barriers will remain in place, Izvestia says.

According to Gary Hufbauer, analyst at the Peterson Institute for International Economics, protectionist reactions to the current economic crisis are likely to follow. "Considering that even within trading blocks such as the EU, participating countries have accumulated a lot of questions for each other over the past few months, and the reaction may turn out to be more emotional and harsh than in previous years," Izvestia reported.

The only area where trade is likely to remain at the same level or even grow is related to the Internet. Data and electronic commerce in the post-quarantine world will become very vital. Nevertheless, according to the newspaper, this is not enough to compensate for the likely collapse in other industries.

 

Nezavisimaya Gazeta: US providing oil support to Lukashenko

Minsk has set out on a path to diversify oil supplies to its refineries. Thus, Belarus' Naftan refinery has already received the first batch of Saudi oil and in early June also expects oil from the United States. According to Nezavisimaya Gazeta, these developments are more of a political, rather than economic nature. Belarus seemingly feels that Russia has discredited itself as a supplier, the newspaper wrote.

Belarus started looking into diversifying supplies to its refineries at the end of 2019, following Russian suppliers’ refusal to conclude contracts. President Alexander Lukashenko of Belarus has set his sights on diversifying supplies so that the share of sources from Russia does not surpass 40%.

Some experts believe that the supply of US oil, as well as general relations between Minsk and Washington, boils down to politics first and foremost, and not economics. By helping Belarus, the US strengthens its geopolitical influence in the region. Furthermore, the market climate has developed in Minsk’s favor, with the price of oil having fallen to a historic low, Nezavisimaya Gazeta pointed out.

According to statistics, the first "non-Russian" deliveries this year did cost Belarus more than Russian oil would have cost (for about $130 per tonne), but now the situation has changed, the newspaper noted. Meanwhile, Adam Sikorski, the chief executive of UNIMOT - the company that will help supply American oil to Belarus - believes that diversification and having a choice of suppliers is a much bigger benefit than even the price.

"Russia has discredited itself as a supplier in the eyes of other countries as well," Nezavisimaya Gaeta wrote, in particular, with the contaminated oil incident. According to the newspaper, Minsk regards Russia’s refusal to conclude oil contracts with Belarus as an element of political pressure and coercion to further "deepen integration", which is gradually turning into a union of the two countries.

 

Nezavisimaya Gazeta: Russia follows China’s lead by dumping US securities

Russia has cut its investments in US government securities by two-thirds from $12.58 bln to $3.85 bln and now relies increasingly on monetary gold, and its share in international reserves continues to grow. In the meantime, the Bank of Russia continues to sell currency on the domestic market to support the ruble. According to Nezavisimaya Gazeta, however, this support will not be infinite. Analysts warn that by the summer, the dollar may once again hit 80 rubles.

This is Russia’s first major reduction in its investments into US government bonds in recent months, following China’s recent decision to cut its investments in US government securities. Experts attribute it to the historic lows in short-term US government securities’ yield as a result of the coronavirus pandemic and the Federal Reserve's support for the economy. Analysts argue that this would lead to the next round of the ruble weakening.

Raiffeisenbank told Nezavisimaya Gazeta that in the summer months, the dollar may approach 80 rubles. "In June, the government will begin to loosen up the quarantine. This will lead to an increase in consumption, including spending on imported products, which, in turn, will put pressure on the domestic currency," Raiffeisenbank believes.

With regard to reducing investment in US public debt, Russia has reduced investments earlier, experts recall. "There is a direct reason for such dynamics. Today, the US can blame Russia for anything and find a reason to freeze Russia’s stake. Today, such conversations are being brought up around China," Head of Alpari Analytical Center Alexander Razuvaev told the newspaper. Meanwhile, monetary gold cannot be seized, it is kept in specialized storage facilities in Russia and can easily be converted into currency, he added.

 

Kommersant: Italy loosens up quarantine, prepares to open borders

On May 18, Italy is lifting the lockdown, which has been in place since March 11. According to Prime Minister Giuseppe Conte, all commercial activities will be permitted, and this includes bars, restaurants, grocery stores, hairdressers, provided they follow the sanitary rules established by the authorities. From June 3, Italy will even open its borders, but just to EU countries. According to Kommersant, these decisions were motivated by growing pressure from business. However, it is unclear how it will continue to survive amid the strict new sanitary regulations.

Conte called the decision to lift the quarantine a calculated risk, which the authorities took, realizing that the number of coronavirus cases could rise again. According to experts, this year Italy’s GDP will decrease by 9%, while the expenditure part of the budget was increased by 55 bln euro to help enterprises and people. This is one of the reasons for the decision to open most enterprises and institutions across the country, Kommersant wrote. The move to open the borders was also the result of pressure on the government from business and the nation’s regional authorities.

As of May 15, in its battle against coronavirus, Italy lost more than 30,000 of its citizens, another 72,000 are still sick. Epidemiologists Massimo Galli, head doctor of the Sacco Clinic in Milan told Kommersant that the epidemic is not over, but the economy cannot wait.

It is still not clear how it will be possible to combine a return to normal life with a sanitary protocol prescribing a mask-and-glove regimen, constant disinfection and social distancing, Kommersant wrote. In the meantime, the news will please restaurateurs, hotel business, and retail. Coordinator for tourism on the island of Elba told the newspaper that hotels there are able to guarantee sanitary safety. However, the influx of tourists from abroad should not be expected before September-October. In previous years, tourism accounted for 15% of Italy's GDP.

 

Vedomosti: Computer sales skyrocket in Russia

In mid-April, demand for laptops in Russia increased significantly, electronic retailers told Vedomosti. Oleg Pchelnikov, Citilink’s procurement director, says that by the middle of the month, sales of these devices in units had doubled compared to the same period in 2019. In the first ten days of April, growth was even greater. However, experts believe that this growth will not last long.

Large retailers like M.video-Eldorado saw sales of laptops in money terms more than double in mid-April and that went for units as well, company rep Valeria Andreeva told Vedomosti. In general, sales of laptops in Russia in the middle of last month in units exceeded last year’s figures by 87%, according to the GfK research company.

The double-digit growth rate in laptop sales, which was seen in March, lingered into April and early May, Acer CEO in Russia Dmitry Kravchenko told the newspaper. He noted that in recent years, they have been replaced by smartphones and tablets, however, with the transition to remote study and work, users again recalled full-feature computers.

Telecom Daily CEO Denis Kuskov told Vedomosti he believes that the computer sales boom caused by the coronavirus epidemic and the transition to remote work and studies will not last long, in particular because buyers will run out of money. This year, Q2 and Q3 will not be as successful for retailers, Kuskov believes.

It seems that buyers do not expect a quick return to their offices, CEO of Infoline Analytics Mikhail Burmistrov told Vedomosti. Many companies plan to optimize office space and increase the share of remotely employed staff, he argues

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