Page 7 - RusRPTMar21

“It is becoming increasingly difficult to make sense of the first release of industrial production figures in Russia given the major revisions made by Rosstat after the full survey data become available. But for what it’s worth, the 0.2% y/y fall in December was revised to growth of 2.1% y/y and, in January, production fell by 2.5% y/y,” said Peach.
Manufacturing growth slipped from an upwardly-revised +7.9% y/y in December to -1.0% y/y in January.
“This partly reflected calendar effects as there were fewer working days in January 2021 than in 2020 but, even in seasonally-adjusted terms, output fell by 4% m/m, which more than reversed the 3.4% m/m rise in December,” reports Peach. “Meanwhile, the mining sector continued its steady recovery as oil production rose further, with mining output growth edging up from -7.5% y/y in December to -7.1% y/y in January.”
The figures also showed that the contraction in retail sales eased from -3.6% y/y in December to -0.1% y/y in January – a lot better than the consensus expectation of a -3.0% year-on-year contraction.
“This was broad-based among food (-4.5% y/y to -1.0% y/y) and non-food (-2.6% y/y to +0.9% y/y) categories and may partly reflect the easing of some virus restrictions in major cities as well as the relatively high level of social transfers from the government,” said Peach.
Overall, Capital Economics’ GDP Tracker suggests that growth in Russia broadly stagnated at -3 to -4% y/y at the start of 2021, but like most observers, Capital Economics expects Russia’s economy to rebound strongly this year from the second quarter onwards to end the year with about 3% growth.
“Russia has come through its second virus wave relatively well compared to many other countries, but the recovery is lacking momentum. With the vaccine rollout looking like it will take months to pick up pace, the downside risks to our GDP growth forecast of 3.5% this year are mounting,” said Peach.
Growth risks in 2021 are on the upside with little downside. A combination of factors is likely to combine to accelerate growth.
BCS GM base case scenario continues to forecast FY21 GDP growth at 3.3% – even despite a lower than expected decline in GDP in 2020.
The likelihood of weaker growth in 2021 is low in BCS GM’s view – such a scenario is possible in the event of a new global financial crisis (for example, a debt crisis triggered by an increase in inflation and rates) and / or in the event of escalated geopolitical risks and a plunge in commodity prices.
7 RUSSIA Country Report March 2021 www.intellinews.com