Impact of COVID-19 on the Welfare of Russian Enterprises

V. V.Osadchii

, A. L. Zolkin

, N. V. Levoshich

, S. I. Tokova

and G. V. Ryabkova

International University of Digital Economy and Technology, Moscow, Russia

Povolzhskiy State University of Telecommunications and Informatics, Samara, Russia

Federal State Budgetary Institution of Higher Education Financial University under the Government

of the Russian Federation, Moscow, Russia

Karachay-Circassian State University, Karachaevsk, Russia

Moscow Aviation Institute (National Research University), Moscow, Russia

Keywords: Coronavirus, Covid 19, Economy, Crisis, Activity, Income, Budget, Unemployment, Expenses, Market.

Abstract: For people around the world, the situation with the coronavirus COVID-19 has shown that all sectors of the

economy, including the activities of companies, ranging from micro-enterprises to large holdings were not

prepared to such issues. The world economy is in deep crisis. Starting from the first quarter of 2020, there

was a decrease in activity in the economies of most of the market leaders. These include the EEC, USA, Japan,

China. The collapse of the ruble and oil prices, a decrease in revenues to the country's budget, an increase in

the share of unemployment, a decrease in household income, an increase in the share of divorces and suicides,

a drop in the quality of education due to the transition to self-isolation, an increase in mortality due to COVID-

19 disease, have led to uncertainty and destabilization of the situation in the country. Since the beginning of

the coronavirus crisis, there has been a significant decrease not only in jobs, but also in population income.

The self-isolation regime has had a significant impact on the lives of ordinary citizens. The world was not

ready for such shocks. The crisis continues to the present. The article reflects information on the dynamics of

the development of Russian entities during the pandemic, examines and analyzes the consequences of the

impact of coronavirus on the welfare of citizens. The consequences of the impact of the pandemic on various

spheres of an individual's life, provided statistical data and proposed solutions outlined in this article, make it

possible to realize the importance of development of preventive measures in response to similar situations.

The analysis of the expected consequences of the pandemic in the economic sphere of the state is also carried

out, the measures applied by the government in the current situation are considered.

1 INTRODUCTION

Over the last year, COVID-19 has caused more than

1 million deaths and has infected more than 26

million people. World gross domestic product (GDP)

is decreased by 5%.For most of the leading minds of

the country, it has become obvious that COVID-19 is

not just an emergency, but a crisis that grips the

humanitarian, social and economic aspects of the life

of the country in general and of each person in

particular. Despite the timely and general

mobilization of all resources in the fight against the

https://orcid.org/0000-0002-4092-1862

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https://orcid.org/0000-0002-1742-3638

virus, the consequences are disappointing: a general

decrease in the standard of living of people, an

increased share of the unemployed, an increase in

prices for goods and services, an increase in the share

of debt on loans to banks. The crisis caused by the

pandemic continues up to date. The consequences of

the impact of the pandemic on various spheres of

human life, as well as the statistical data presented in

this article, make it possible to realize the importance

of development of preventive measures in response to

such situations.

V. Osadchii, V., Zolkin, A., Levoshich, N., Tokova, S. and Ryabkova, G.

Impact of COVID-19 on the Welfare of Russian Enterprises.

DOI: 10.5220/0011119400003439

In Proceedings of the 2nd International Scientiﬁc and Practical Conference "COVID-19: Implementation of the Sustainable Development Goals" (RTCOV 2021), pages 285-291

ISBN: 978-989-758-617-0

285

2 PROBLEM STATEMENT

The purpose of this study is to review and analyze the

impact of COVID-19 on human well-being.

Objectives:

 to consider the consequences of the pandemic

in Russia;

 to study the family budget of the population

during pandemic;

 to analyze the income of population during

pandemic.

Research hypothesis: it is assumed that if we

analyze the consequences of the impact of COVID-

19 on the well-being of the country's citizens over the

past year and, having made the right conclusions,

direct efforts to develop preventive measures in the

future, then such situations will be minimized.

3 RESEARCH QUESTIONS

In this study, the method of analysis and classification

has been used as a methodological basis for the study.

Internet publications on the impact of COVID-19 on

the welfare of the country's citizens have been used as

a basis for the theoretical study.

4 MATERIALS AND METHODS

The negative consequences of COVID-19 are still felt

in many sectors of the Russian economy, from

industrial companies of various sizes to the agro-

industrial complex. Since the beginning of 2020, the

demand for many types of goods and services has

changed significantly. The purchasing power of the

citizens of the country has significantly decreased. If

we analyze the negative consequences of the

pandemic, then significant “damage” was caused to

meat and milk processing industries, as well as to fish

farms. However, companies that are engaged in crop

production have suffered less due to significant

export volumes. Before the pandemic, demand for

dairy products tended to decline. This was especially

noticeable in premium dairy products. In the minds of

many people, the pandemic was associated with

uncertainty, so many people in our country became

more frugal and thrifty. However, the spring of 2020

has allowed many food companies to increase

production due to increased demand. With the start of

the coronavirus crisis, the prices for imported

vitamins, which were part of the compound feed,

have been increased. And this, in its turn, led to an

increase in prices for all meat and dairy products,

where imported vitamins account for more than 70%.

5 RESULTS

All this ultimately led to a natural increase in prices

for all meat and dairy products.

Since the beginning of the coronavirus crisis, there

has been a significant decrease not only in jobs, but

also in the incomes of the country's population. It

could not but affected the decrease in demand for

products that belong to the expensive segment,

including: fish and various seafood, exotic fruits and

vegetables, cold cuts and flowers. Due to a decrease

in the purchase price for products grown in

greenhouses by retailers, prices for vegetable crops

decreased by 15-20% (see Figure 1).

Changes in demand for products manufactured by

agro-industrial enterprises could be well tracked in

retail chains [6,7].

The category of citizens who purchased products

in premium segment stores such as Land or Azbuka

Vkusa will continue to shop there. However, most of

the citizens with middle or low income have reduced

their consumption of meat and dairy products. In

2020, prices for all main types of products from the

consumer goods basket have been increased as a

result of the weakening of the ruble and falling of the

price for oil.For example, prices for bakery products

increased by 5%, seafood by 4%, dairy products by

5.5%, eggs by 6.5%, and cereals and legumes rose in

price by almost 26%.Thus, a significant increase in

prices has been observed only for legumes and

cereals, while prices for meat products increased by

only 0.7%.

The COVID-19 pandemic has covered the world,

creating unusual conditions that have affected all

areas of human life. These changes have dealt a

devastating blow to production and the field of

entrepreneurship, and therefore the consequences of

the pandemic for the global economy are already

obvious. Russian economic experts are concerned

about the impact of unfavourable factors on the

domestic economic system. According to their

assumptions, as a result of the spread of the pandemic

and the subsequent reduction in production, Russia's

GDP will decline by about 10-20%. Moreover, oil,

which is considered one of the main commodities

supplied by Russia to the world market, has dropped

significantly in price due to the decrease in transport

activity around the world. Experts assume that the

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Figure 1: Food costs at the start of the pandemic.

average annual rates for this fuel resource will not

exceed $ 25.

It shall be admitted that the coming crisis was

expected. Back in 2014-2015 experts predicted the

onset of a global economic recession due to

overcapitalization of market systems and monopoly

trends in economic structures. This stage of the

economic cycle was considered inevitable, but its

onset came much closer with the advent of the viral

infection COVID-19.

The impact of the pandemic turned out to be so

strong that in the face of the difficulties that arose,

major political conflicts receded into the background,

including the confrontation between China and the

United States, as well as the Brexit process in the UK.

Universal involvement in solving problems caused by

the pandemic has led to a change in course of solving

political, social and economic problems. Due to a new

round in the development of events, other goals, tasks

and issues have emerged that need to be addressed.

Considering the future of Russia in the context of

the impact of the pandemic, experts identify five

possible shock conditions that the country's economy

may undergo.

The first option is the emergence of difficulties in

establishing international relations and contacts with

other states. The reason for this phenomenon may be

the negative consequences of the impact of the

pandemic on the micro- and macroeconomics of the

state.

The second option is associated with a decrease in

oil demand. As one of the main exported products, oil

provides an inflow of funds to Russia. A decrease in

demand for this resource and a general drop in prices

can lead to a weakening of the cash flow directed to

the state budget, which will entail a decline in the

economic system.

The third option is the outflow of funds from

Russia. From the experience of the past decades, it

can be understood that during periods of recession,

funds are transferred from the country to other states

– funds are sent to more developed and promising

systems, or transferred to offshore accounts.

A fourth option is to consider the risk of increased

controls and restrictions that governments may

impose to support overall security. The restrictions

associated with the self-isolation regime generally

reduce the intensity of freight traffic, trade and sales.

The purchasing power and the activity of

entrepreneurs are decreasing. There is a gradual

decline in the incomes of citizens of the country,

which leads to adverse consequences for the

economic system.

Experts say that the fifth option is a decrease in

the level of trust of legal entities and entrepreneurs in

the government and legislative bodies. As a result of

the loss of mutual trust, certainty will be lost, and the

level of protection of entrepreneurship will decrease.

Business development planning will become much

more difficult, since in unstable conditions it is

difficult to make assumptions and forecasts [8,9].

According to statistics from the United Nations

(UN) report "World Economic Situation and

Prospects", as a result of the introduced protective

measures designed to prevent or slow down the

spread of the COVID-19 virus, the global economic

system has decreased by 4.3%. The pandemic-related

January February March April May

60,5 60,5

65,4

56,8

20,9

20,6

23,8

Food costs at the start of the pandemic

General expenses Food expenses

Impact of COVID-19 on the Welfare of Russian Enterprises

287

crisis is reported to be greater than any economic

recession in last 90 years.

Crisis situations have already happened in Russia.

For example in 1998 the economy was reduced by

5.3%, in 2009 by 7.8%. In 2020, the decline in

economic activity reached 3.1%. The decline in the

volume of GDP is associated with absolute and

relative factors. In absolute terms, the decline in

production indicators is associated with a decrease in

resource extraction, transportation system,

commercial activities and the service sector. In

relative terms, large losses were incurred by the

catering sector, which decreased by 24%, as well as

by the spheres associated with holding mass events

(cultural and sports segments, which suffered losses

by 11.4%).

The main factor associated with both the risks and

the hopes of the Russian economy is oil, because the

intensity of raising funds depends on the level of its

exports. The government is pinning its hopes on an

increase in oil prices, in particular on Urals products,

but this factor depends on many conditions. Oil can

rise in price only after the full resumption of transport

links between the countries, as well as the return of

production facilities to their previous level of activity

[5].

At the same time, most experts in the field of

economics come to the general opinion that the

pandemic inflicted the least damage on China. This

country was the first to face an exacerbation of the

epidemiological background and quickly overcame it.

In addition, a large number of large industrial

complexes, equipped with the latest technology,

operate in China. In combination with the high

working capacity and the level of responsibility of the

population, China can quickly recover as well as

come to positive results.

In other countries, the situation remains uncertain.

This is also true for Russia, since there is a general

decline in epidemiological safety in our country. At

this stage, accurate forecasting of further events in

Russia is not possible.

6 FINDINGS

The self-isolation regime has had a significant impact

on the life of an ordinary citizen of our vast homeland,

including their daily expenses. None of us faced a

similar situation before and, therefore, for the first

time after the declaration of self-isolation, many

citizens continued to live in the same regime, in the

hope that it would end soon.

On the one hand, the transition to home mode

allowed significant savings on fuel and lubricants and

transportation costs to and from work, payment of

monthly fees for school and kindergartens, and visits

to coffee houses and restaurants. But on the other

hand, there has been an increased expenditure of the

family budget for food. Most of the population began

to purchase food, clothing and other basic necessities

from online stores. Scrolling the ribbon with

beautiful, appetizing pictures encouraged people to

make rash purchases. Therefore, part of the

population continued to live as usual, replacing

visiting food courts with orders via the Internet.

In addition to the increase in food costs, which at

the beginning of the pandemic were fueled by the

artificial rush for the purchase of all cereals, tomatoes

and toilet paper, there have been serious trends in job

cuts due to a decrease in overall demand. In every

second family, there was a 2 times decrease in income

due to a reduction in one of the breadwinners, a

general decrease in income, especially during the

period of illness of one of the family members [10].

Despite the pandemic, it was necessary to pay

monthly fees for previously taken loans. However,

many banks, in order to reduce the risks of economic

damage, have taken measures that allowed citizens to

softly withdraw from credit obligations. The

measures were: reduction of refinancing rates,

issuance of credit loans on favourable terms, debt

restructuring, cancellation of penalties on previously

issued loans.

7 DISCUSSION

The pandemic has made its own adjustments in the

incomes of the population. Many companies were not

ready for such situation, and most of the company

owners did not have a strategy for further

development in the current situation. As a result,

some of the companies that could not promptly react

and adapt to the current situation left the market. Here

is the data on the number of registered and liquidated

companies during the pandemic (see Figure 2).

All this could not but affect the income of the

population. Many company owners sent their staff to

work remotely, someone found a way out to layoffs

or send them on indefinite leave without pay.As a

result of a decrease in demand for goods and services,

the establishment of restrictions on movement,

interruptions in the supply of necessary raw materials,

all this led to a decrease in production volumes, which

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Figure 2: The number of registered and officially liquidated organizations in the federal districts of the Russian Federation in

January-September 2020.

Figure 3: The number of unemployed citizens registered with the employment service of the population in the federal districts

of the Russian Federation at the end of September 2020, thousand people.

also negatively affected the income of the self-

employed and small enterprises [11] (see Figure 3).

If we analyze the situation in the Central Federal

District, then by the end of the 3rd quarter of 2020

there were almost 941,000 people in active search, in

other words it is an unemployed category of citizens.

More than 711,000 people were registered in the

employment services.

But due to the state policy to support the

population and business during the pandemic, the

income of the population did not fall below the level

of the consumer basket (see Figure 4).Among the

measures of state support, the following can be

distinguished:

● increased unemployment benefits;

● increasing benefits for caring for children of

different ages;

● various subsidies, preferential lending

programs, deferrals.

And if we consider the situation with payroll in the

Central Federal District, then in the period from the

beginning of 2020 to the 3rd quarter of 2020, the

nominal wages of company employees amounted to

62,600 rubles, which exceeded the indicators of 2019

by 6% [12].

Impact of COVID-19 on the Welfare of Russian Enterprises

289

Figure 4: Average monthly wages of employees of organizations by federal districts of the Russian Federation in January-

September 2020, rubles.

8 CONCLUSION

Thus, in our opinion, such situations in the world

should force the governments of all countries to

reconsider the issues of state support for the

healthcare sector and other leading sectors of the

economy in order to carry out timely respond and take

appropriate measures, as well as strive to reduce the

number of unemployed in any area.

The behaviour of a person as a consumer of goods

and services cannot be changed in the short time. For

this reason, that part of the citizens who were able to

adapt to the current conditions, competently approach

the distribution of the family budget and spending,

use the current situation for their own benefit, will be

able not only to survive this difficult period with

dignity, but also to find new ways out, thereby

increasing their income. The consequences of the

pandemic will be felt for some time in every country.

As preventive measures, it is necessary to develop

such steps that will be aimed at covering of all

segments of the country's population. The more

economically stable the state is, the easier it will be to

go through such situations. The coronavirus crisis has

become a turning point for the entire world, forcing

great minds to think wider and deeper.

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