Russia

Market overview

Responsibility for COVID-19 lockdown measures has been transferred entirely to Russia's regions and municipalities, to determine for themselves whether to retain, enhance or lift restrictions.

While Moscow has previously had strict measures in place, the city's mayor announced an easing of restrictions from 1 June with retailers and parks reopening. Movement restrictions were lifted on 8 June, and businesses such as salons and veterinary clinics reopened. From 16 June, restaurants, entertainment venues and various other public-facing service sector companies reopened.

The Russian Government website has regular updates on COVID-19 in Russia here. You can stay updated on COVID-19 in Russia through The Moscow Times.

For more information on doing business in Russia, visit myNZTE - our free online portal for curated, in-depth information and guidance.   


Economy and trade

The nature of the Russian economy is likely to mitigate the impacts of COVID-19: its heavy dependence on natural resources, its limited SME sector and its dominance by the state (estimated to employ 40-50% of Russia's total workforce).

However, GDP has still been predicted by Russia's Audit Chamber to decline by 3-5% based on a 'moderate' scenario, and by up to 8% from a pessimistic view.

The main impact of the international response for COVID-19 on the Russian economy has been on global oil and gas demand. Oil has been more affected due to the collapse of the OPEC+ deal. Oil and natural gas account for approximately 60% of Russia's exports.

Macro-Advisory predicts that the Russian economy will suffer a sharp decline in the later half of 2020 due to the oil price collapse and the economic impacts of COVID-19.

While there are other variables that could affect the Russian economy over the coming months (such as how long the economy will be in lockdown for, what the pace of recovery will be, how oil and gas will trade etc), the Central Bank of Russia expects the impact of COVID-19 to result in a contraction of 1-2% this year.

More pessimistically, the International Monetary Fund expects Russian GDP to drop by 5.5% in 2020.

Real disposable income decreased by 0.2% in the first quarter 2020 due to the weakening of the national currency, whereas the effects of the lockdown will be visible in the results of the second quarter. Annual decrease in real disposable income for 2020 is forecast at 6.5%.

Supply chain, logistics and freight

Ports

St Petersburg's port and local customs have adopted to the COVID-19 crisis and are working as normal.

While there has been little to no changes in sea freight and the trade routes remain stable, air freight to St Petersburg is not available due to the travel ban.

The transit port of Klaipeda in Lithuania is a vital port for New Zealand exporters to Russia, particularly for New Zealand wine. The movement of cargo ships in this port is continuing as usual, and the port has provided FAQs for exporters on its webpage here.

Logistics and freight

Freight trucks are seeing border control queues from transit ports in the Baltics. Some companies signal that the time en route from Klaipeda to St Petersburg (usually three days) could more than double, up to 7 days.

Russia has suspended all regular and charter flights to other countries, however limited flight connection (including cargo) is available for selected capitals from Sheremetevo airport in to Moscow.

Government support

Since 17 March, the Russian government and Central Bank of Russia (CBR) have progressively introduced various packages of economic support for businesses within Russia. Measures of support include:

  • A three-month deferral on insurance contributions for SMEs.

  • No inspections of SME businesses, including tax and customs inspections, indefinitely.

  • The CBR is expanding its refinancing programme for SMEs. A new lending facility will be in place with a refinancing limit of 500 billion rubles. From 23 March, the Bank of Russia lending rate on both facilities is 4% (read more here).

  • Providing short-term targeted loans and loans to SMEs on favourable terms for the payment of wages and other urgent needs.

  • Recommendations to regions and municipalities on reducing property taxes for certain sector businesses.

  • Various rule changes designed to help businesses preserve cash flow, generally consisting of tax breaks, tax holidays and a bank on bankruptcy cases against business for six months.

In order to encourage maintaining employment and wages, the government will also pay sick leave for those in compulsory quarantine.

The government also identified the most affected sectors that the government will prioritise for support such as tourism, food service and transport sector (full list here) with measures including:

  • Tax holidays for companies within the aviation and tourism sectors. The CBR will make it easier for banks to lend to these sectors, and the government will guarantee loans.

  • Import tariffs for the retail sector for essential commodities (such as soap and long life products) will be reduced to zero for one month, and "green corridors" will be introduced for importers and large retail networks.

The Central Bank of Russia provides up-to-date information on measures being taken in Russia.

Advice to exporters

In terms of immediate activity, make the safety and wellbeing of teams your priority, and invest as needed to ensure a safe and healthy working environment. Many businesses are still allowing employees to work from home where this is possible. Check in with your business partners and see how they are doing and how you might be able to support them during this time.

From a long-term perspective, market uncertainty is likely to be the biggest issue for companies operating in Russia. This is seen particularly in regards to currency volatility, which can make New Zealand products less affordable, and customer liquidity affecting customers' ability to pay.

Sector insights

Alcohol 

Sales of alcohol in stores in the Russian Federation have accelerated amid quarantine and bar closures. According to Nielsen, sales of vodka in stores in the largest retail chains in Russia for the week from March 23 to 29 increased by 31% year-on-year.  

According to a Sberbank consumer report, the surge in spending in the category of “wine shops” amounted to 31% year-on-year from 30 March to 5 April (after the introduction of a regime of self-isolation of citizens). 

E-commerce 

In the first “non-working week” from 30 March to 5 April, Russians’ consumption habits changed drastically. The number of online orders at cafes and restaurants increased by 78% in comparison with the last week of February, according to payment service provider Yandex.Checkout. 

Business operations

Public events are prohibited, and all businesses in Moscow have switched to working from home wherever possible.

According to the decree of the Mayor of Moscow, employers must organise regular temperature measurements for all employees. Those who have signs of the disease and citizens over 65 years old should not be allowed to work.

The Russian government has set up a Coronavirus online inspection where employers can receive online advice on how to apply labour laws and how to operate effectively in this new environment.

Travel

There is no longer any mandatory two-week quarantine for arrivals into Russia. Negotiations are underway with other countries on flight resumptions.


Additional resources

Below you can find information and contact details for other New Zealand government and international agencies regarding their response to COVID-19.

New Zealand Government agencies

Covid19.govt.nz
COVID-19 helpline for businesses
Business.govt.nz
New Zealand Customs
Ministry for Primary Industries (MPI)
New Zealand Export Credit (NZEC)
MFAT Export Helpline
MFAT Safetravel
Callaghan Innovation
Immigration
Ministry of Health
WorkSafe New Zealand
myNZTE

Global agencies

World Health Organization (WHO)
Centers for Disease Control and Prevention (CDC)

Contact NZTE

We're available to talk to you about any issues your export business is facing due to COVID-19.

For existing NZTE customers, please contact your New Zealand-based Customer Manager.

If you're unsure who to contact or haven't worked with us before, you can call NZTE on 0800 555 888 or email below and one of our Customer Advisors will help you.