Ural Federal University: Scientists Named Russian Regions that Could Not Adapt to Pandemic Conditions

The economies of the Sverdlovsk and Novosibirsk Regions and Perm Territory showed the least adaptability to the conditions of the first wave of the coronavirus pandemic. In these regions, the difficult socio-economic situation remains at all stages of the development of the pandemic, even after the removal of strict restrictive measures at the end of July last year. By contrast, the economies of the Voronezh, Volgograd, Chelyabinsk and Omsk Regions and Krasnoyarsk Territory did not experience any serious difficulties. The economies of Rostov, Nizhny Novgorod and Samara Regions, as well as Tatarstan and Bashkortostan, were in the middle of the range, which experienced problems at the beginning or as the pandemic spread, but then were able to adapt to the extreme situation.

Such conclusions were reached by a group of scientists from Ural and Southern Federal Universities, which analyzed the situation in 13 highly urbanized regions of Russia with centers with millions of people (excluding Moscow and St. Petersburg) in March-July 2020. These subjects are home to one-third of Russia’s population, concentrate more than 35% of total industrial production (including mining and manufacturing enterprises), about 40% of total agricultural production, and more than 30% of total retail turnover.

The scientists’ estimates are based on data on retail trade and public catering turnover, the volume of paid services to the population, the unemployment rate, data from the Federal State Statistics Service and the 2GIS mapping company. An article with the main conclusions of the research was published by the co-authors in the journal Area Development and Policy.

According to researchers, the specifics of the coronavirus crisis are that federal subjects with complex economies, a high proportion of urban population, developed small and medium-sized businesses, centers of business and inbound tourism have been hit. In other words, the regions that have so far been the first to recover from economic turmoil. The situation is more favorable in the territories with a large share of large industrial enterprises, which avoided suspension or closure due to their backbone nature. Regions with agrarian specialization, where agricultural works and activities of agro-industrial complex enterprises did not stop, were also subjected to lesser risks and tests.

Another factor in the success or failure of regional economies during the coronavirus pandemic is the degree of severity of restrictions imposed by the authorities on the population and businesses (quarantine and self-isolation of citizens, introduction of non-working days, reduction or prohibition of activities in certain areas of the economy), combined with the level of effectiveness of state support measures for entrepreneurship undertaken by federal subjects. The most stringent restrictions on the background of weak support measures delay the process of recovery of regional economies; recovery is much faster in regions with weaker restrictions and strong support measures, the authors of the article state.

“A comparison of the anti-crisis experience of the regions showed that the most productive fiscal measures to support business – tax breaks, deferrals of mandatory payments, as well as direct financial assistance aimed at maintaining liquidity and stability. A positive role is also played by the reduction of the administrative workload on business, the introduction of a moratorium on various inspections. But granting loans is an unattractive type of support, because the conditions for obtaining loans are usually difficult to meet and risky,” comments Irina Turgel, head of the Research Group, Head of the School of Economics and Management at the Ural Federal University.

Businesses prefer loans to the principle of “one can always make one’s own entertainment”: digital transformation, organizing remote work of employees, mastering and developing Internet trade, delivery of goods, turning to the current and promising markets of medicines, disinfectants and personal protective equipment, comfortable real estate and storage facilities, household goods and repairs, auto sales.

The authors of the article offer “survival guide” in case the pandemic continues. The authorities should diversify the economy, reduce its dependence on individual industries and sectors, modernize public transport, urban and regional logistics and communication networks, increasing the connectivity of central and peripheral areas, improve mechanisms of training and retraining of personnel, strengthen the financial and credit system. Businesses should pay attention to the growing interest of consumers in healthy lifestyles, in improving the comfort of housing and transport, in the markets of online education, education, catering, trade, leisure, entertainment services, continue to develop remote forms of employment, online services, expand the necessary infrastructure and equipment fleet, and train personnel.

“The serious restrictions on business undertaken by the authorities last year were justified; they saved many lives. This is especially valuable given the demographic holes that have formed in our country due to the upheavals of the last century. But now Russian entrepreneurship needs more effective state support. And the state has enough money not to choose whether to support business or social sphere, first of all health care. In addition, we need to remember that small and medium business is millions of jobs and thus a guarantee of the solvency of taxpayers and the stability of consumer demand. It is a lifesaver for cities without large-scale industrial production and risky farming areas,” Irina Turgel explains the importance of increasing state support for entrepreneurship.