The State Versus COVID-19:
how the post-Soviet countries have tackled the pandemic crisis GR in times of quarantine

May 21, 2020
Much has been written of the unprecedented nature of the global pandemic crisis, particularly the devastating impact it has wrought upon our communities, our health systems and of course our businesses and economies. Not in living memory, it seems, has a crisis seemed so widespread, so completely indiscriminate and so total in its impact on modern ways of living.
Facing up to the scale of these challenges, no government could afford to remain on the sidelines. The pandemic pushed them quickly to adapt their decision-making practices to a degree unprecedented in modern times – even when compared to the financial crisis of 2008.
Much has been written of the unprecedented nature of the global pandemic crisis, particularly the devastating impact it has wrought upon our communities, our health systems and of course our businesses and economies. Not in living memory, it seems, has a crisis seemed so widespread, so completely indiscriminate and so total in its impact on modern ways of living.

Facing up to the scale of these challenges, no government could afford to remain on the sidelines. The pandemic pushed them quickly to adapt their decision-making practices to a degree unprecedented in modern times – even when compared to the financial crisis of 2008. In this article, we provide a brief overview of how the governments in several post-Soviet countries have faced up the struggles posed by the pandemic. While the new reality appeared quickly and (despite the forewarnings from China and Italy) at an incredible speed, the actual timing of state responses has differed greatly across the countries, thus contributing, many have argued, to the considerable variances in the impact of the virus.

In particular, we cover the general quarantine restrictions, changes in the working habits of key public authorities, and the proposed support measures to industry sectors that have suffered most. We cover six countries: Russia, Belarus, Kazakhstan, Ukraine, Kyrgyzstan, and Uzbekistan, focusing less on qualifying the efficacy of such measures (which still seems somewhat premature) than on giving a structured overview of the government responses in our region to such a devastating and unprecedented challenge.


Quarantine: is there no end?

Russia was among the first countries to introduce an entry ban for foreign citizens in early March. Despite this move, Russia currently has recorded 308,705 (as of 20/05/20) COVID-19 patients, putting it second only to the U.S. in terms of impact.

As the number of cases in Russia grew, Russian regions, starting with Moscow, initiated a high alert regime within its territories. By now Moscow alone has 152,000 patients with COVID-19; that is approximately 1.2% of its population. By the end of March, restrictions were applied in every region, however, the emergency regime across the country had not yet been introduced.

The high alert regime was replaced with a period of enforced or encouraged 'non-working days' starting from March 30 and ending on May 12. The Federal Government at the same time received the authority to introduce a high alert or emergency regime throughout the country but held back from implementing this measure, instead leaving the responsibility of responding to the spread of the COVID-19 with regional governors, a measure continually emphasized by President Putin during his regular TV briefings. Critics have maintained this was a cynical move to avoid future criticism of the crisis response.

Most of the regions followed Moscow's example by introducing a self-isolation regime for citizens, reducing the number of mass events, and stopping the activity of a large part of businesses. Some of them even issued special digital passes to control the movement of citizens under quarantine.


In Russia, the Federal Government at the same time received the authority to introduce a high alert or emergency regime throughout the country but held back from implementing this measure, instead leaving the responsibility of responding to the spread of the COVID-19 with regional governors, a measure continually emphasized by President Putin during his regular TV briefings.
In response to the crisis, the decision-making in Ukraine, with 19,230 cases of COVID-19 by May 20, was more centralized. On March 17 the Verkhovna Rada, the Ukrainian Parliament, passed the Law on Countering the COVID-19 infection. This allowed the Government to change the working regime of a company or a state body as well as introducing the ban on scheduled events. Later the Government introduced more restrictive measures such as prohibiting all mass events and gatherings, visiting public areas and activity of non-essential city services, such as restaurants, and entertainment centers. Only companies selling food products, medicines, and other first-need goods as well as banks and delivery services were allowed to operate.

The Kazakh Government, where the number of cases is currently 6,969 patients (20/05/20), had introduced a lockdown of its largest cities Nur-Sultan and Almaty on March 19. This was followed by a ban on entry and exit from these cities with some exceptions for the transport of food and medical supplies. At the beginning of April, all other regional centers were either quarantined or restricted, prohibiting business activity and forcing citizens to remain at home. With only 35 reported cases of deaths from the disease, the approach of Kazakhstan seems to have been the most effective one in the region.

A similar situation took place in Kyrgyzstan, 1,270 cases, where authorities quarantined the biggest cities and regions and introduced a curfew from 20.00 until 7.00. The emergency situation had also pushed them to cancel local government elections that were initially scheduled for April 12. Uzbekistan, 2,880 cases, followed a similar path, requesting citizens to self-isolate and suspending all railway and air passenger services.

Only Belarus stands out from the other countries in this cluster (31 508 registered cases by 20/05). The Government did not impose any restrictions on the entry of foreigners, only obliging those arriving from countries with epidemic outbreaks to self-isolate for 14 days. General internal quarantine measures were not considered by the Belarussian authorities; instead, they chose on trying to placate growing anxiety and panic among the people. The Council of Ministries restricted mass events, but the order was not fully respected or implemented: the all-nation voluntary Saturday work on April 25 and the Victory Parade on May 9 both took place with the presence of the country's leadership.

To date, most of the quarantine provisions in the considered countries remain in force. The governments are not willing to lift all of them at once and prefer to make incremental adjustments. In Russia, with the official end of non-working days on May 12, the regions were allowed to soften restrictions based on the improved statistics of new COVID-19 cases. A similar situation is seen in Uzbekistan where all administrative regions are color-coded according to the strength of restrictions remaining in force.

Kazakhstan ended its national state of emergency on May 11, allowing small and medium retail and service sector businesses to reopen. Kyrgyzstan has also canceled its curfew and some restrictions.

Ukraine extended its quarantine to May 22 but has lifted some restrictions from May 11. Recreation areas and sports facilities, cultural entities as well as small and medium restaurants and service companies were allowed to open.


Public authorities go online

The quarantine measures also affected the working regime of public authorities. The need to maintain balance regular decision making with demands of social distancing pushed most government bodies to work virtually or in other new methods, with most meetings involving public authorities now held via teleconference.

Across the region, though, the executive branches, namely governments and presidential administrations, have continued to work as usual in most of the countries. In some cases, such as Uzbekistan and Kyrgyzstan, most government employees were sent to work from home or were encouraged to take annual leave. The regular governmental working groups in Kazakhstan and Russia are held via video or audio conference calls. Only Belarus refused to introduce any new arrangements, instead providing informal advice to state bodies' employees to restrict visits to other regions within the country.

Presidential administrations in Russia and Kazakhstan continue to operate as usual while taking regular health checks of its staff. Access to public buildings is limited only to personnel working there. At the same time, President Putin has left Moscow and closed locked himself up in a dacha from where he contacts meetings the government and world leaders. A number of high-profile public servants were infected with coronavirus, including Prime Minister Mikhail Mishustin, Ministers of Construction and Culture, and the Press Secretary to President.

The hardest political blow had to be taken by President Putin as he was forced to postpone indefinitely the National Vote on the constitutional amendments that opened the possibility for him to remain in power until 2036. His current presidential term, already fourth one, ends in 2024. According to the current rules he is not allowed to run for the post again. However, the proposed amendments, that were due to be voted in on April 26, set Putin's previous presidential term count back to zero.

Right after the National Vote, President planned to have massive celebration and military parade after the 75th anniversary of the Victory Day together with the leaders of countries that were involved in WWII. However, he had to settle for a modest and lonely celebration without any guests and the parade in front of the Eternal Flame just outside of the Kremlin.
The hardest political blow had to be taken by President Putin as he was forced to postpone indefinitely the National Vote on the constitutional amendments that opened the possibility for him to remain in power until 2036.
A more nuanced situation is seen in state parliaments. None of the countries stopped the work of their parliaments, however the general trend has been to minimize the participation of the outsiders in all working proceedings, such as meetings of working groups and committee meetings, while at the same time reducing the number of all non-urgent events. In Russia, Kazakhstan, and Belarus, parliaments continue to hold regular plenary sessions.

The only branch that has moved online almost completely is the judicial one. In almost all countries, public access to court buildings is prohibited, while hearings, where possible, were transferred online. Receiving citizens remains prohibited and all necessary documents are received either via the Internet or postal services.


State support for businesses

With Q1 figures being released, we are just now starting to see the true scale of the economic impact across the region of a crisis that the International Monetary Fund forecasts will shrink the global economy by 3%, which is much worse than during the 2008-2009 financial crisis [1] .

Below we mainly concentrate on measures taken by the Russian government. In Russia, the 1Q GDP is projected to grow 1,6% YoY, while in the second quarter the GDP is projected to fall to 8-9.5% according to the authorities [2] . Annual GDP, as predicted by the Ministry of Economic Development, will shrink by 4-6% compared to 1.3% growth in 2019 [3] .
In Russia, the 1Q GDP is projected to grow 1,6% YoY, while in the second quarter the GDP is projected to fall to 8-9.5% according to the authorities. Annual GDP, as predicted by the Ministry of Economic Development, will shrink by 4-6% compared to 1.3% growth in 2019.
The economic downturn is caused by the lockdown of the economy, shrinkage of consumer spending, and the major drop in oil prices from 67.3$ in December 2019 to 18.4$ in April 2020, exacerbated by the stand-off over agreeing on production cuts right back at the start of the Crisis in March this year. The oil shock also sent Russian national currency, the Ruble, into freefall, from 61 to the dollar in January, down to 80 in March even though it has raised to 72.4 rubles by May 2020.

Across all six of the markets analyzed here, the pressure to support businesses has been both severe and extremely challenging, given the period of stuttering economic growth that preceded the crisis.

The largest support package among the countries we cover in this article was prepared in Russia, which was equivalent to the value of 3% of GDP and may grow further. While significant to the region, this level of support is dwarfed by those economic rescue programs mobilized in Western Europe: 10,2% of GDP in Spain, 13,2% in France, 16,5% in the UK and 45,5% in Germany [4] . It includes soft loans for SME to pay salaries to its employees, as well as higher state guarantees on most of the banking credits increasing access to loans for a larger number of companies.

Unemployment growth in Russia hit 1,65 mln people in May 2020, 29,5% growth was registered during the period of non-working days. Experts predict that the number of unemployed people in Russia may grow to 8 mln as a result of the pandemic [5] . The entities that operate in the most hard-hit sectors also received tax deferrals for 6 months as well as the reduction in insurance tax rates. Special packages of measures have been prepared for systemically important companies in different sectors of the economy - more than 1100 are on the list – with support to them prioritized over the others.

Apart from financial support, the Russian Government also postponed all scheduled inspections of oversight bodies and prolonged the terms of licenses and conformity assessment of products.

Support packages in other countries are more modest. Kazakhstan provided some companies and individual entrepreneurs with tax exemptions. Other measures cover mostly the deferral of loans and its overall suspension to SMB mostly affected by the current situation.

Although the quarantine has not been officially introduced in Belarus, the Government announced the direct fiscal support at cost of $43 million and its will be allocated to the production of clothing, logistic, tourism, operations with real estate and leasing, etc. Concrete measures include the reduction of rental fees and property taxes.

An interesting decision was made in Ukraine where legislative restrictions on providing state support to SME were lifted, giving them exemption from paying a single social contribution until the end of May. Other measures such as a moratorium on scheduled and unscheduled inspections, extending the period for filling out income and wealth statements, and rescheduling the assessment of product conformity mirrored those taken in Russia.

Uzbekistan has also provided businesses with fiscal support measures only, reducing the minimum social tax form individual entrepreneurs, contributions from alcohol wholesalers, and the tax rate for the use of water resources for agricultural purposes.


What's Comes Next?

The subsequent steps of the considered states would highly depend on the epidemiological situation and the ability to localize the virus so that the rest of the country and economy could return to its ordinary life.

For instance, in Russia, the Ministry of Economic Development (MED) plans to submit to the Government a draft plan of measures to support Russia's economic recovery in 2020-21. The three-stage plan envisions further steps to reduce the spread of COVID-19 and mitigate its economic consequences through the end of the third quarter. The plan's targets for the end of 2021 include 4.5% YoY growth in capital investment; 5% growth in non-energy exports; a 3% expansion in the manufacturing sector; a 4% increase in retail turnover; and 3% growth in the services sector.

The Ministry of Economic Development's draft plan predicts a federal budget deficit of 8.5% of GDP in 2020, which is more than double the Finance Ministry's 4% estimate. According to the plan, the Government would continue to reallocate budget expenditures to support the economy in 2020 without changing key budget parameters and use the National Wealth Fund, the Pension Fund, and domestic and external borrowing to cover the deficit. In 2020, Russian regions would be authorized to exceed their deficit limits by the amounts of pandemic-related expenditures.

In Ukraine, the International Monetary Fund forecasts that GDP will fall 7.7% in 2020 and the unemployment rate grows to 10.1% [6] .

In Kazakhstan, the national economy grew 2.7% in the 1Q of GDP, while the annual growth in 2020 is expected to be 1.8% [7] .
In Ukraine, the national GDP is predicted to fall 7.7%, while in Kazakhstan the growth might be only 1.8%
The economic effects of the pandemic will be more visible in the upcoming months as well as the effect of the state support. However, it is already clear that the current crisis, with its profound effects on work and lives, our health systems, economies, indeed on most aspects of our societies, will bring wide ranging and long-lasting consequences for us all.

For further information or to discuss the contents of this article, please contact us via phone:
+32 2 899-4699 or e-mail:
info@kesarev.com

[1] https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020
[2] https://www.kommersant.ru/doc/4349274
[3] https://www.kommersant.ru/doc/4331900
[4] For more details on these and other countries see https://www.bruegel.org/publications/datasets/covid-national-dataset
[5] https://www.interfax.ru/russia/706821
[6] https://www.epravda.com.ua/rus/news/2020/04/14/659382/
[7] https://kapital.kz/economic/85969/abr-ponizil-prognoz-rosta-vvp-kazakhstana-do-1-8-v-2020-godu.html