Page 6 - RusRPTMar21

1.0 Executive summary
Russia’s economic results for 2020 were encouragingly good. The acceleration of the covid-19 pandemic in Russia during the second half of 2020 reduced economic activity due to such factors as restrictions on personal movement.
There is clear evidence that economic recovery has started. The January data should be treated as a clear proof of major improvements in Russia’s economic performance. This is especially important because in the larger part of the country quarantine restrictions were still in place while base factor was not supportive for y/y comparisons.
The Markit IHS purchasing managers’ indices (PMIs) for Russia illustrate this current improving sentiment. More importantly, they augur a gradual return of economic confidence in Russia. The readings for the manufacturing PMI (50.9) and services PMI (52.7) both exceeded a neutral reading of 50 points in January and February, thus indicating increasing business activity. The last time both indices were above 50 points was in September 2020. Confidence about the future in services rose sharply to a level last seen in October 2019.
On the manufacturing side, seasonally adjusted production has grown nearly uninterrupted since last summer, but was still down from 2019 by 2.5% in the fourth quarter of 2020 (the on-year change in December was -0.2%). The production ceilings on crude oil output under the OPEC+ agreement continued to depress the mineral extraction sector, but manufacturing output increased by an impressive 4.4% y/y in December (2.9% in November).
In the fourth quarter of 2020, production of services fell by 13% y/y. Services output collapsed by nearly 40% in spring and the subsequent recovery has taken time. The construction sector last year managed to preserve production levels under exceptionally trying conditions. In the fourth quarter, construction grew by 0.8% y/y.
Russia’s sector activity data for January showed that industry came off the boil at the start of the year while activity in the retail sector picked up strongly as the effects of the coronacrisis start to fade, Capital Economics said in a note on February 18.
“The fall in virus cases and relaxation of some restrictions should support the economy in Q1, but the painfully slow vaccine rollout adds to the headwinds further ahead,” Liam Peach, an economist with Capital Economics, wrote.
Industrial production softened at the start of this year after picking up in the last quarter of 2020.
6 RUSSIA Country Report March 2021 www.intellinews.com