Page 32 - bne IntelliNews Country Report: Russia Dec17

Opinion Research Centre (VTsIOM). The respondents answered a question if Putin can maintain stability in the country. Some 84% in August and 90% in September believed that Putin will be definitely able to ensure stability. In August 61% and in September 72% of respondents said Putin would be able to ensure both stability and changes. Some 63% said Putin had a plan on overcoming the crisis, while another 22% said the opposite.
3.0 Macro Economy
3.1 Macroeconomic overview
Russian GDP growth slowed down to 1.6% y/y in 9M 2017 Rosstat’s figure for 9M 2017 released November 23 . Such dynamics allows us to keep our forecast for the whole year at 1.8% y/y. That it is in line with the recent estimates of the CBR while earlier the regulator expected the growth at 1.7- 2.2% y/y. The Ministry of economic development remains more positive and forecasts GDP growth at 2.1% y/y in 2017.
Russia’s GDP rose 2.2% y/y in 3Q17 due to the one-off support from agricultural sector and steadier acceleration of retail sales and 2.4% yoy in September,
Economic Development Minister Maksim Oreshkin announced that the GDP growth rate stood at 2.2% y/y in 3Q17. This represents slight deceleration compared with the 2.5% y/y spike in 2Q17, but is still above the 1H17 figure of 2.0% y/y. The official GDP growth estimate from the State Statistics Service will be released at a later date.
Given that the strong spike in the GDP growth rate to 2.5% y/y in 2Q17 was mainly considered a one-off , maintenance of the economic growth rate above the 2% mark could be regarded as a positive surprise.
Indeed, the industrial production growth rate significantly and expectedly declined from 3.8% y/y in 2Q17 to 1.4% y/y in 3Q17, b ut this negative effect was offset by two factors. Firstly, as we expected, the recovery in consumption became firmer, as growth in retail sales accelerated from 1.0% y/y in 2Q17 to 2.0% y/y in 3Q17.
Thanks to a positive grain harvest surprise this year, output in Russia’s agricultural sector accelerated sharply from -0.9% y/y in 2Q17 to +5.1% y/y in 3Q17 . According to our estimates, this contributed 0.4 pps to the GDP growth rate in 3Q17.
Given that agricultural activity is seasonal in nature, it is unlikely to lend support to economic growth in 4Q17 . However, consumption growth, in our view, could continue, which is why we do not exclude that our full-year guidance for GDP growth at 1.5% y/y could be exceeded.
Recent consumption growth has been relying more heavily on leverage and less on higher income . However, the potential negative effect on the
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