Annual Report 2020

Macroeconomic environment in 2020

In 2020 the world economy experienced an unprecedented shock caused by COVID-19 pandemics which led to numerous lockdowns, slow-down of consumer and business activity and as a result had a negative impact on the prices of natural resources: oil, natural gas, coal

The global GDP decreased by 3.3% in 2020, the largest decline since 2009 (0.1%). The advanced economies became the main contributors to the decline: the US GDP decreased by3.5%, the German one — by4.9%, the French one — by 8.2% and the British one — by 9.9%. At the same time the Chinese GDP grew by 2.3%, still a significant slow-down compared to 5.8% in 2019.

As a result of unfavorable macroeconomic conditions, the Russian economy declined by 3.0% in 2020. The largest decline was observed in tourism (55.4%), air transportation (46.8%), food and lodging industry (24.5%), production of vehicles (16.3%). At the same time some sectors managed to demonstrate growth: manufacturing of drugs and pharmaceutical products increased by 22.2%, production of furniture grew by 8.0%, financial and insurance business — by 7.3%, production of machinery and equipment (excluding transports) — by 6.1%.

In the beginning of March 2020 OPEC+ agreement was suspended which resulted in a rapid decline of oil prices to the level of US$ 16 per barrel (Europe Brent Spot Price) by the end of March. The next agreement was signed only on in April. Oil prices reached the level of US$ 40 per barrel by the beginning of June, never growing higher than US$ 52 per barrel in December.

Following decrease of oil prices Russian ruble also showed negative dynamics: the exchange rate of Russian ruble to US dollar fell from Rub 66 at the beginning of March to 78 at the end of the month, Euro — from Rub 74 to 88. The average US$/Rub exchange rate amounted to 72 rubles in 2020, Euro/Rub — to Rub 83.

The current account surplus declined to the level of US$ 33.9 billion in 2020 (compared to US$ 64.8 billion in 2019). Total exports amounted to US$ 379.1 billion, while total imports reached US$ 304.7 billion. Exports of crude oil declined to US$ 25.2 billion (41% compared to 2019), exports of natural gas declined to US$ 72.4 billion (40% compared to 2020).

By the end of 2020, consumer inflation in Russia (the Consumer Price Index) increased to the level of

4.9% (3% in the previous year). Industrial Producers Price Index reached 3.6% by the end of 2020. The average unemployment rate in 2020 reached 5.8% compared to 4.6% in 2019.

The Central Bank of Russia decreased the key rate 4 times in 2020 (from 6.25% at the beginning of the year to 4.25% in July) to support the economic activity on the back of halting production and trade in 2Q 2020, and to make the loans more available for both business and households.

Consequently, the total corporate debt (excluding international debt) reached Rub 46.7 trillion (+12% YoY) at the end of 2020, and loans to individuals grew up to the level of Rub 21.6 trillion (+13% YoY).

As the result of low key rate banks also lowered deposit rates, so households and businesses were stimulated to switch to financial instruments, such as corporate bonds and stocks, etc. Thereby the MOEX Russia index (counted in rubles) grew to 3,289 index points at the end of 2020 (+8% compared to the end of 2019). At the same time RTS Index (counted in US dollars) declined to 1,387 points (10%) during 2020.

The Russian Budget showed a shortage of Rub 4.1 trillion, equal to 3.8% of the GDP. Budget revenue decreased by 7.3%, while spending grew by 25.3% compared to 2019. Total external debt of Russia (both government and corporate) decreased by 4.8%, to the level of US$ 467.9 billion.