Pandemic Economy: The Russian Way

Abstract

The article discusses the development of the Russian economy in the pandemic of a new coronavirus disease. The causes of prolonged stagnation are summarized and the barriers to the transition to recovery growth after the crisis of 2015–2016 are assessed. A macroeconomic ‘demand trap’ is described that impedes such a transition. It is shown that there is no possibility to use endogenous factors to exit this trap, and by early 2020 the external factors were in a state of unstable equilibrium which was disrupted by the beginning pandemic. The analysis of the pre-crisis dynamics of the global economy is carried out and it shows the probability of foreign demand to act as the Russian economy driver is low and, on the contrary, there is a high probability of aggravated stagnation in case of transition from low to negative growth rates in developed economies. Even without the pandemic, the global economy teetered on the brink of recession as low capital accumulation with an increasing rate of debt blocked the growth of aggregate demand. The article demonstrates how the forced restriction of economic activity in the pandemic caused a negative demand growth and the inadequate increase in government debt in the major world economies as to the level of interest and liquid reserves of state budgets that led to the transition of the world economy to the zone of negative GDP growth and employment rates. Variant calculations of economic and financial damage to the Russian economy have been made. The parameters of economic dynamics are estimated in connection with the introduced restraints of economic activity

Keywords

• stagnation
• economic dynamics
• crisis
• economic activity
• damage
• institutions