Russia Economy - April 2017

Data from the Federal State Statistics Service showed that Russia’s GDP has returned to growth territory in 4Q16 after seven consecutive quarters of contraction. GDP grew 0.3% y-o-y in 4Q16. The main factor behind this notable improvement was an increase in gross capital formation by 2.7% y-o-y. Contraction in household consumption, while continuing in 4Q16, slowed to 3.2% y-o-y compared with 4.8% y-o-y in 3Q16 and 11.3% y-o-y in 4Q15. Government consumption maintained the same rate of contraction since 2Q16 at 0.5% y-o-y in 2Q, 3Q, and 4Q16. The country’s imports increased for the first time in three years, by 0.4% y-o-y, while exports posted an increase of 3.7% y-o-y which is lower than the 4.2% of the previous quarter. As a result, net exports increased by 7.0% y-o-y in 4Q16, a slower pace than the 15.3% of 3Q16. The figure in the last quarter of 2016 brought the overall contraction in GDP to 0.2% y-o-y for the whole of 2016.

For the fourth consecutive month the ruble appreciated vs. the dollar in March, though by only 0.7% m-o-m, compared with 2.6% m-o-m in February. A downward inflationary trend continued in February, posting 4.6% y-o-y consumer price inflation, the lowest since June 2012. After leaving its benchmark interest rate unchanged at 10% for six months, the central bank slightly lowered the rate to 9.75% in March.

Russia’s Markit Manufacturing PMI remained in growth territory in March, posting a slightly lower reading of 52.4 compared with the previous month’s 52.5. The survey confirmed the continuation in production and new business expansion, in addition to showing rising optimism in the sector. The services sector, on the other hand, maintained its expansionary performance in March which made 1Q17 the strongest quarter since 4Q12. The respective index increased to 56.6 in March, up from February’s 55.5. The country’s industrial production shrank by 2.7% y-o-y in February 2017 for the first time since January 2016, while retail sales also declined by 2.6% y-o-y in February. The unemployment rate was unchanged in February at 5.6%.

Indications from the past few months have provided reasonable evidence to raise the GDP forecast. GDP is now anticipated to grow by 1.2% y-o-y in 2017.