Four days between the first and second May holidays were declared non-working days. The question arises how the extra weekend will affect the economy.
It so happened that in the period between the May holidays, many employees take a short vacation and a total of 10-11 days at the beginning of the month. Four additional weekends in 2021 formalize the long holiday period, while maintaining the right to full-time holidays at other times of the year.
In the period of economic recovery after the coronavirus crisis, the legislation places an emphasis on social support. But the decree on additional days off cannot be linked solely with the need to support citizens after the pandemic. The decision of the state authorities was motivated by the need to limit contacts between people at the still high rates of COVID-19 incidence in order to “improve the health of citizens of the Russian Federation.”
At the same time, the introduction of additional holidays will not put significant pressure on GDP growth rates due to the accelerated recovery of the Russian economy and stabilization of indicators. So, in the first quarter of 2021, we managed to balance the budget to a deficit-free level; As of April 16, the volume of international reserves of the Central Bank of the Russian Federation increased to $ 583.7 billion, which is $ 20 billion more than last year. The Ministry of Economic Development expects GDP growth in 2021 to be 2.9%, almost completely compensating for the contraction of the economy in the pandemic 2020, and additional holidays will not put significant pressure on the final figure.
However, it is incorrect to say that the president’s decision will not affect the economy. Business will be especially burdened. Last year, due to the pandemic, a “coronavirus vacation” was already introduced. The audit and consulting company FinExpertiza then estimated the losses of companies in the payment of salaries to non-working employees at 123.6 billion rubles. However, in 2021, employers still have the opportunity to maintain a standard schedule for at least some of their employees. It is difficult to predict how many companies will take advantage of the vague wording of the May weekend decree, but I expect the economic impact to be much softer than when lockdowns were introduced in spring 2020.
Last year, the weekly damage to the economy was calculated by FinExpertiza, taking into account the fact that exceptions were made only for the life support infrastructure. Now, based on the general wage bill, educational institutions will incur the greatest losses. They will be required to compensate the salaries of educators, teachers, instructors and trainers. Also, the greatest losses will affect consulting organizations with a large staff of accountants, lawyers, consultants, analysts, engineers.
Retail trade will suffer to a lesser extent. Retailers are likely to find an opportunity to pay additional employees for work on holidays, and the costs will be offset by increased consumer demand. The restaurant and hotel business employs about 370 thousand people (according to FinExpertiza). I expect that the bulk of the employees in this industry will also continue to work, and the “holidays” will allow them to receive additional income, comparable to two weeks of revenue.
The unemployment rate in Russia is rapidly declining, in March the indicator reached 5.4% (-0.3% against the month before) against the forecast of 5.6%. Probably already in the second half of the year the number of unemployed will be less than 4 million people. In this regard, additional holidays will not change the trend of increasing employment levels; they can only slightly delay the creation of new jobs.
Production growth in March amounted to 1.1% versus February. Of course, additional weekends can slow down the emerging positive trend. But on the eve of the holiday season, many consumer goods companies are already cutting production or preferring to build up inventories.
The index of business activity in the manufacturing sector of the Russian Federation, prepared by Markit Economics, has been consistently above 50 points since January this year. This means that, according to a survey of purchasing managers, manufacturing and the economy are showing an increase in business activity. Four days off are hardly capable of fundamentally changing this. Manufacturing activity may traditionally decline during the May holidays, but this will not lead to a shortage of goods, including due to the fact that the share of imports in retail stocks is 38% (according to the Central Bank).
Holidays may have an ambiguous effect on inflation in May. But long weekends usually have a negative impact on the ruble exchange rate. Market participants are reducing their “long” positions in rubles, fearing volatility, and also because of the increased demand for foreign currency from tourists traveling abroad.
Although the nominally forced downtime of enterprises and organizations for four days could cost the economy up to 0.5% of monthly GDP, given the growth in consumer activity, I believe that the potential losses to the economy will be lower. The still closed borders in most tourist destinations will contribute to the growth of Russian spending within the country. In addition, a significant part of enterprises from various industries do not stop their activities and continue to work, as, for example, it was during the New Year holidays.
Author – Financial Analyst
The editorial position may not coincide with the opinion of the author
#Feasts #Strife
source https://pledgetimes.com/feasts-of-strife/
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