Russia's GDP declined 3.6% in the third quarter, a major improvement from the 8% drop in the second quarter. Analysts believe this is due in part to the lifting of coronavirus-related restrictions. If this trend continues, Russia's official estimates of a 3.8% GDP contraction for the year may be validated. However, if the second wave of the pandemic worsens, then official predictions–and plans– may be overturned.
The pandemic has exacerbated Russia's regional debt crises, forcing the national government to provide significant additional funding. Even in a normal year, Russia's regional governments struggle to balance the books, as their only revenue comes from personal income and corporate taxes. The national government is able to generate revenue from state-adjacent oil and gas companies, but regions must make up budget shortfalls by borrowing and receiving federal transfers. Though regional economies improved during the summer, the impending second wave of the coronavirus threatens to hit even harder than the first did, which will create a significant economic impact especially for less well-connected regions and those dependent on oil and gas prices. This raises questions for the recovery of the Russian economy, which the government has so far been positive about.
