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Press review: US wants China to pay for COVID-19 and top banker sees ‘rebound’ after virus

Top stories in the Russian press on Monday, April 20

Izvestia: Russian budget deficit in 2020 may reach $75 bln

Russia’s budget deficit in 2020 may reach around 5.6 trillion rubles ($75.6 bln) instead of the previously planned surplus of 900 bln ($12.15 bln). A source told Izvestia that the gap can be adjusted in the near future, when it becomes clear how much money will go into the state coffers from the sale of Sberbank in 2020. A senior federal official confirmed that the Ministry of Finance was targeting the oil price at $20 per barrel in its calculations.

According to the newspaper, the last time changes to the federal budget for 2020-2022 were officially introduced had been in February. According to Izvestia, in the spring, the Ministry of Finance planned to draw up a new version of the financial plan, however, amendments to the document were postponed indefinitely.

Moreover, the newspaper reported that estimates for intra-departmental use had already been made. According to a source close to the government, a "working version" of the federal budget has been developed, based on which the estimated price of Urals oil for 2020 will be $20 per barrel, yet in February this figure was planned at $57.7. The source said that the forecasted level of revenues to the federal treasury is 15.2 trillion rubles ($205.22 bln), but this figure has not yet taken into account revenues from the purchase of Sberbank from the Bank of Russia. At the same time, treasury expenditures will increase by more than 1 trillion rubles ($13 bln) compared with the official plan of up to 20.8 trillion rubles ($280 bln).

The newspaper reported that it is planned to finance the budget deficit from several sources: 2 trillion rubles ($27 bln) from the National Wealth Fund, more than 1 trillion rubles ($13 bln) from additional sources, and the rest will be borrowed from the market. At the same time, the newspaper source did not specify exactly what amount is planned to be borrowed.

Another Izvestia source, a senior federal official, partially confirmed the information, admitting that the Ministry of Finance is actually targeting the price of selling Urals oil at $20 per barrel. At the same time, the source called the general figures for revenue, expenses, deficit, sources of financing and GDP close to the main scenarios. In addition, the source noted that the government seeks to minimize risks and has relatively conservative assumptions, thus they have no plans to increase forecasts for oil prices after the conclusion of the OPEC+ deal.

The Ministry of Finance told Izvestia that "the forecasts of the country's socio-economic development, including oil prices, are being developed by the Ministry of Economic Development", and "the ministry has not yet submitted an updated macroforecast." The Ministry of Economic Development did not answer the newspaper’s questions, and the government press service recommended contacting the Ministry of Finance.


Nezavisimaya Gazeta: Pandemic threatens China-US economic ties, world economy

US-Chinese economic and technological ties could break down amid Washington’s threats to present China with a bill for the coronavirus pandemic, Nezavisimaya Gazeta wrote. Surveys of US companies show a new trend to shift production from China to other countries due to the threat of "the separation of economies" and the breakdown of economic chains. Despite these prospects, the Chinese economy will grow this year, while the US economy is likely to decline by almost 5%, the newspaper wrote.

The weakening of ties between the US and Chinese economies has become a more realistic prospect due to disruptions in supply chains and further complicated relations between the two countries, according to a survey conducted by the American Chamber of Commerce in China and the American Chamber of Commerce in Shanghai. According to the study, today, only 44% of 25 large US companies say that a separation of the two largest economies is impossible, whereas in October last year 66% of those surveyed stated that it was impossible. Meanwhile, 16% of companies declared their intention to partially or fully transfer production outside China.

In the current turbulent situation, the deterioration of US-China relations will complicate the global economic situation, which will be felt by all markets, experts interviewed by Nezavisimaya Gazeta believe. "In this case, a further drop in demand for energy and commodities is possible. For Russia, this means an additional negative factor in a very difficult economic situation," Head of the KRK Group’s office Nikita Ryabinin said. "The gap in production chains between the US and China, and between other countries will mean a deeper economic downturn worldwide and a slower recovery than previously predicted. A deeper global recession will hit the Russian economy, as our country is closely integrated into the global economic processes," senior analyst at BCS Premier Sergey Suverov added.

"The Western world is a design bureau, and China is its factory. You can change the factory, but a factory without engineering brains will not be able to work and develop," Head of Alpari analytical center Alexander Razuvaev told the newspaper. In his opinion, it is not worth expecting to see the previous level of cooperation between Beijing and Washington.


Nezavisimaya Gazeta: Afghanistan taken aback by sharp criticism from Russian diplomacy

The Afghan leadership is surprised by criticism coming from the Russian Foreign Ministry, sources in Kabul told Nezavisimaya Gazeta. Earlier, Maria Zakharova, the Russian Foreign Ministry‘s spokeswoman, accused the Afghan authorities of delaying the exchange of prisoners with members of the Taliban (banned in the Russian Federation), which is one of the conditions for implementing the recent deal concluded in Qatar between the US and the militants. At the same time, Moscow blames Washington for this situation.

"Such statements clearly will not improve Russian-Afghan relations," the source in Afghanistan told the newspaper commenting on Zakharova’s statements. According to the source, Kabul was surprised by the tone of the statement by the official representative of the Russian Foreign Ministry. During her regular briefing on April 17, Zakharova noted that the US continued efforts to prevent the Qatari deal from breaking down, the next stage of which is the start of direct negotiations between the conflicting parties — Kabul and the Taliban. However, this goal is hardly possible without solving the crisis of power in Kabul, which arose as a result of the failure of last year’s presidential election, she added.

The statement by the Russian Foreign Ministry can be explained by the dissatisfaction that Russian diplomatic initiatives regarding Afghanistan have lost their relevance, Nezavisimaya Gazeta wrote, adding that this happened after the United States had monopolized the Afghan reconciliation. Director of the Center for Contemporary Afghan Studies Omar Nessar told the newspaper that Russian-Afghan relations remain a problem. "The political crisis that arose in Kabul after the elections did not remove the tensions between the two countries that had appeared after 2014," the expert said. "Obviously, Moscow expected certain steps from the United States to form an inclusive government in Kabul," he added.


RBC: VTB CEO expects Russian economy to ‘rebound’ quickly after coronavirus

Andrey Kostin, who heads VTB, a top Russian bank, expects a quick "rebound" in the Russian economy after the coronavirus pandemic, he said in an interview with RBC. Meanwhile, Russia’s banking sector may lose about 2.5 trillion rubles ($33.53 bln) due to the crisis. As for the dynamics in the market, the VTB chief explained that at the moment, "investors are driven by emotions, not calculations."

"I hope we can avoid any worst-case scenarios. People began saying that this is the Great Depression, but there is an IMF estimate — the global drop in production will be about 6%. The forecast for Russia is -5.5%. This is a serious challenge. The IMF plans that in 2021, growth rates in developed countries, and in Russia, will be higher on average than in previous years, so I expect a fairly quick ‘rebound’. But only if the predictions that the virus will be fought for two years do not come true. Then, of course, the situation can change for the worse," Kostin noted.

Meanwhile, according to the CEO, Russia’s banking sector may lose about 2.5 trillion rubles ($33.53 bln) because of the crisis. However, he hopes for a favorable outcome and the ability to cope with the current situation. "This will depend on how quickly manufacturing recovers, including the sectors that are under noticeable pressure," Kostin added. He said that he did not consider the banking crisis in Russia inevitable, and that problems of other industries should not be solved at the expense of credit organizations.


Vedomosti: Smartphone sales in Russia collapse due to COVID-19 pandemic

In the first non-working week in Russia due to the spread of coronavirus (from March 30 to April 5), smartphone sales in Russia plummeted by about 50% compared with January, February, and the first days of March, Vedomosti wrote citing materials from the GfK market research company. According to Anna Shebek, an expert on the telecommunication products market at GfK, comparing year-to-year sales both in monetary and in real terms, the decline even exceeded 50%. She attributes the drop to the closure of most electronics stores.

An employee from one of the major retail chains agrees with GfK’s estimates. In the first two weeks of April, smartphone sales in Russia fell by about 40% in physical terms, due to the quarantine and other restrictions imposed over the coronavirus pandemic, an employee of another retailer told the newspaper.

This plunge was preceded by a rise in sales in mid-March, compared with the beginning of the year, they increased by 50%, according to GfK. The peak occurred on March 9-15 and coincided with a drop in oil prices and the plunge in the ruble exchange rate. Compared to the same period last year, sales in March increased by 13% in real terms and by 17% in monetary terms, Shebek said.

After a very good first quarter, when both expensive smartphones and laptops showed a sharp increase in sales, now the demand for them has fallen sharply due to the closure of offline stores and the lower incomes of the population, CEO of Infoline Analytics Mikhail Burmistrov told Vedomosti. He hopes that a recovery will begin in the third quarter. However, in general, the annual decrease will amount to 25-40%. It depends on when the restrictions will be lifted from the retail sector, the expert believes.


TASS is not responsible for the material quoted in these press reviews.