Lower demand for oil has weakened the Russian economy

Russia's economy, which is dependent on oil revenues, declined in 2020. And the steepest in 11 years. It was hit by blockades to stop the spread of the new coronavirus and fall in commodity prices. The statistical office Rosstat informed about it. According to the first estimate, Russia's gross domestic product (GDP) fell by 3.1 percent last year after rising by 2 percent the previous year.

Global decline in demand for energy resources

However, the central bank expected an even worse result, a fall in GDP of 3.9 percent last year. Rosstat attributed last year's decline to "restrictions imposed in the fight against the new coronavirus and a decline in global demand for energy resources." Last year's decline in Russia's GDP of 3.1 percent was also a relatively good result compared to many European countries, as Spain's GDP fell by 11 percent, France by 8.3 percent and Germany by 5 percent. However, European countries renewed blockades last autumn to halt the second wave of the pandemic. In contrast, Russia, which curtailed economic activity to six weeks in the spring, ruled out further blockades, although it was also hit by a second wave of infections.

Big losses in other industries

Rosstat said the biggest losses last year were in sectors such as hospitality, transport, culture and sports. Although Rosstat did not release quarterly data, it is expected that after a sharp decline of about 8 percent in the second quarter and 3.4 percent in the third quarter, the Russian economy has recovered in the last three months of 2020 and grew by an estimated 7.4 percent. Before the pandemic that hit Russia in March, its economy grew by 1.6 percent year on year in the first quarter of 2020. President Vladimir Putin hoped that 2020 would be an opportunity to revive a stagnant economy that has been under pressure from Western sanctions for years. However, oil prices fell sharply in early March 2020, and so did Russia's energy revenues. The Russian Ministry of Economy expects the economy to return to growth in 2021 and estimates that GDP will increase by 3.3 percent.