The economy 2020: How Moscow dealt with the pandemic

2020 has been one of the most difficult and unpredictable years for the whole world. The pandemic affected various cities, regions and countries as well as entire areas of life. The Moscow economy was no exception; but it has survived this period of extended congestion, challenges and changes. Even during the strictest restrictions key city projects were not suspended and companies and enterprises proved they could make decisions quickly and work with the situation.

“Under the temporary restrictions, we managed to stabilise the economy in the city. The city economy has adapted to working under the current conditions, which the support measures have encouraged. Most industries are showing growth now. Total trade and service volumes have stabilised and, since November, have deviated from pre-crisis numbers only slightly, even considering the deteriorating epidemic situation; we are even seeing a bit of growth compared with last November. We have also managed to maintain production: over 11 months of 2020, the production index grew 4.1 percent compared with the same period last year,” noted Deputy Moscow Mayor for Economic Policy and Property and Land Relations, Vladimir Yefimov.

Yefimov added that the volume of investment in the city’s fixed assets over nine months amounted to 1.9 trillion roubles, which is 11.5 percent more than the same period last year, and accounts for 16 percent of all investment in the country. Based on this indicator, Moscow confidently tops the rankings among Russian regions.

Healthcare and social support: 2021 budget

The sustainability of Moscow’s economy and its preparedness for new challenges are reaffirmed by the city’s budget, which was adopted in December. It envisions money to implement all social programmes (healthcare and support for individuals) as well as to construct roads, transport systems and social facilities.

In 2021, about 57 percent of the city budget’s expenses will be allocated for social needs, or 1.8 trillion roubles. The state healthcare development programme will be the 2021 priority: expenses will grow 13.4 percent. Next year they will exceed 748 billion roubles (considering funding from the Federal Fund for Mandatory Medical Insurance).

Providing people with accessible and high-quality medical assistance will be a priority task, including the prevention of cardiovascular and infectious diseases, oncology, high-tech assistance, as well as free vaccination against COVID-19. Starting in 2021, the Healthcare Development programme will become the largest in the city in terms of funding. Those in need will also receive free or subsidised medicines.

The budget includes almost 532 billion roubles for the social support of people, including additional payments to pensions, subsidies on travelling in public transit, utility payments and medicines, among many other things. Direct payments for families with children will account for 63.5 billion roubles, and for the elderly 188.8 billion. This money will make it possible to index benefits and compensate for payments at a level above inflation.

Open dialogue with business

The city supported businesses comprehensively during the pandemic. To do this, an economic response centre was established in March, headed by Deputy Moscow Mayor for Economic Policy and Property and Land Relations Vladimir Yefimov. It ensures a dialogue between the authorities and the business community to receive updates on the city’s economy and the support businesses need.

In March, an online service and hotline were launched to collect proposals and quickly update businesses. Over 70 percent of the comments and complaints received were taken into account when making anti-crisis decisions to support the Moscow economy. Since the launch, the economic support centre has received more than 12,000 comments from businesses, and the city continues to advise entrepreneurs to this day.

Tailored aid: Incentives, deferrals and subsidies

Considering business requests, in the spring the Moscow government developed and adopted four support packages valued at about 90 billion roubles. In December, a fifth package of measures was adopted. Incentives and subsidies have helped many entrepreneurs survive difficult times.

The first package was adopted on 24 March. It supported companies in the tourism, culture, sports, leisure, restaurant and hospitality sectors. Small businesses were granted tax deferrals. Organisations that were forced to close were also exempted from lease payments on city property in the second quarter of 2020.

The second package of measures was adopted on 31 March. It extended the list of companies that received tax and trade tax deferrals or were exempted from lease payments. In addition, subsidies and were introduced for small and medium-sized businesses, exporters and franchisees, as well as preferential loans for young companies.

The third package of measures to support businesses was approved on 15 April. It expanded the guidelines on loans and helped developers, hotels, cinemas, extracurricular education organisations, health resorts, social entrepreneurs and small businesses that buy real estate from the city. Support measures were also introduced for companies leasing real estate from private shopping and office centres.

Real estate owners who leased their properties for trade, services, restaurants and hotels got the right to have the property tax and land payments for two quarters of 2020 fully compensated if they at least halved lease their rates (and reduced it to at least double of the compensated tax). Owners who carry out these activities themselves can be compensated half of their taxes. This way, the city supported both leaseholders and specific companies that rent premises for hotels, offices and shops.

The fourth package of measures was published in late May. Private medical clinics were added to the list of affected industries. The deadline to pay advance payments for the first quarter of 2020 for property and land tax was extended until 31 December 2020. Moreover, clinics leasing land plots and nonresidential facilities from the city were exempted from lease payments starting 1 March until high alert status is over but not earlier than 1 July. Press kiosks were exempted from paying for the right to carry out trading activities for three months: from 1 April to 30 June.

The fifth package of measures was adopted in December. The Moscow government has extended the 14 Subsidies programme. Subsidising the interest rate on loans for small and medium-sized businesses was also extended for another six months, until 1 July 2021. The minimum and preferential lease rates for urban non-residential properties will remain valid throughout 2021. Some entrepreneurs were exempted from payment under contracts for the implementation of trade activities in non-permanent retail facilities from March to June 2020.

As of mid-December, these support measures have been used by 50,000 Moscow companies employing 770,000 people. They have received some 35 billion roubles in support. Tax deferrals, rental vacations, grants and subsidies were the most popular among Moscow businesses.

These numbers include 5,000 companies that received a property and land tax deferral for a total of 2.5 billion roubles. Almost 26,000 trade organisations were granted a grace period for paying trade fees, which amounted to almost 1 billion roubles, and 3,300 organisations were exempted from lease payments for city property during suspensions on activity, which totalled 2.6 billion roubles. Also, 3,600 organisations received lease deferrals until the end of the year; this support amounted to 16.4 billion roubles.

Some anti-crisis support measures were developed especially for small and medium-sized businesses, such as subsidies, preferential loans and grants used by over 13,000 companies.

From building schools and outpatient clinics to opening new metro lines

Despite the pandemic, Moscow continued to implement its large projects in 2020. For example, by 2021 the line of families waiting for their housing conditions to be improved was reduced to 50,000. In 2020, the city built over 300,000 square metres of housing under the Housing Programme. A comfortable urban environment with beautified green courtyards, parks and relaxation areas is being created around the new housing. The implementation of the relocation programme continued. Since its launch, over 80 residential buildings with a total space of about 1 million square metres have been built in Moscow.

The city’s social infrastructure also continues to be developed. The Tailored Investment Programme helps with this. Its main projects include construction of roads, schools, kindergartens, polyclinics, hospitals and other facilities. Every year Moscow spends 20 percent of its budget to implement this programme. Despite the pandemic, the volatility of global markets and the suspension of deliveries, Moscow implemented large infrastructure projects in transport, healthcare and education.

Moscow continues to focus on the transport system. In 2020, 115.5 kilometres of roads and corresponding infrastructure were built. In the spring of 2020, during the peak of the pandemic, the second section of the Nekrasovskaya metro line (line 15) was opened. Another six stations were added to the four opened in 2019. The line took the burden off the Tagansko-Krasnopresnenskaya line (line 7), famous for its dense passenger flow. On 31 December, the tenth station on the Big Circle Line, Elektrozavodskaya, was opened.

The city continues to build all sections of the Big Circle Line, the largest metro circle in the world. During the next several years, work will continue to extend existing lines and build new radial lines: to Kommunarka, Troitsk, Rublyovo-Arkhangelskoye and Biryulyovo.

The Moscow Central Diameters (MCD) project is also continuing. The new surface rail lines connect the city with outer Moscow districts; and the new trains run every 5 to 7 minutes during peak hours. At the end of 2019, two diameter lines were opened; development, as well as preparations for three other diameter lines, continued throughout 2020. Work on current and prospective diameter routes will continue in 2021.

Other victories

Despite the difficulties, 2020 was a year for growth in other areas. The launch of the state preferential mortgage programme at a 6.5 percent annual rate was among the most significant events. This support measure stimulated the housing market, the construction market and the financial sector. As a result, Moscow borrowers have set an absolute record in the entire history of the market. The Federal Service for State Registration, Cadastre and Cartography (Rosreestr) recorded 12,000 mortgage loans in October 2020, which is 51 percent higher than in October 2019. The Bank of Russia reported that the number of mortgage loans issued to people living in Moscow during 10 months of 2020 totalled 87,250 an increase of 37 percent.

2020 was a breakthrough in the comprehensive development of former industrial zones. For example, Moscow has signed the first two agreements in Russia, on the comprehensive development of the Oktyabrskoye Pole and Korovino industrial zones. By 2026, a modern industrial park, a business centre, residential buildings and the infrastructure necessary for working and living (including kindergartens, a school, a clinic and parking) will be built in place of the former six-hectare precast concrete plant on Oktyabrskoye Pole. A new industrial and business centre with advanced infrastructure will be built in Korovino in place of the former House-Building Plant. Contracts on another four areas – Bratsevo, Chertanovo, South Butovo and Altufyevskoye Shosse – will be signed in 2021. The total area of former industrial zones to see redevelopment will reach almost 60 hectares.

In total, about 150 areas are being developed. It is planned to build over 37 million square metres of industrial, public, social and residential facilities in these areas. The development of these areas will provide almost 500,000 jobs, attract 7 trillion roubles of private investment and ensure the income of almost 3 trillion to the budget.

The stability of the economy helped Moscow to rise in international rankings. For example, in 2020 Moscow improved its ranking in 23 global rankings. In 2020, Moscow was fourth on the list of best cities according to Resonance Consultancy, Canada. Moscow was also 12^th in the CEOWORLD Magazine rankings, which evaluates cities according to how they influence the global economy. Experts note Moscow’s positive dynamics in such sectors as the economy, digitalisation, innovation and startups, sports and the environment.