Page 27 - RusRPTMar20

3.0​ ​Macro Economy 3.1 ​Macroeconomic overview
Russian GDP growth rate was assessed at 1.6% y/y in January ​which is above the 0.6% y/y reported for January 2019 and 1.3% y/y GDP growth for 2019. The fact that the growth rate remains relatively strong is not surprising given the substantial spike in federal budget expenditures last month, which supported output growth in the manufacturing industry. However, the 1.6% y/y growth rate is not strong enough to provide a buffer against a possible deterioration in economic activity related to the negative effect of the Chinese coronavirus. Thus, the February figure remains an important litmus test and GDP growth should not drop below 1.1-1.2% y/y this month if it is to meet our 1.4% y/y GDP forecast for 1Q20.
The State Statistics Service has preliminarily reported that GDP grew 1.3% in 2019, down from 2.5% growth in 2018 (revised up from 2.3%). ​The growth was mainly driven by household consumption (up 2.3%, versus 3.3% growth in 2018) and investment (up 1.4%, versus 0.1% growth in 2018). The contribution from net exports was negative, as exports declined by 2.1% in real terms, while imports were up 2.2%.
Only the annual GDP data for 2019 was released. The quarterly GDP breakdown has yet to be published. The quarterly data currently available for 9m19 will likely be revised in March (when the updated figures and official numbers for 4Q19 are published) and is not entirely comparable with the annual numbers. Nevertheless, the data for 9m19 and 2019 can be used to make some judgments about the performance in 4Q19. We estimate that household consumption growth slowed to 1.7% y/y in 4Q19 from 2.5% y/y in 9m19, while investment growth climbed to 3.8% from 0%, due to increased budget spending on infrastructure during the quarter. We also estimate that exports remained weak, contracting by 1.9% y/y compared with a 2.2% decline in 9m19, while imports improved, rising 5.5% y/y compared with 1% growth in 9m19.
On the production side, GDP growth was driven last year by industrial production (up 1.8%), wholesale and retail trade (up 1.7%), and the financial sector (up 9.7%), while construction added only 0.4% y/y and agriculture rose just 0.6%.
The full-year figure was in line with our forecast, as we had expected a deceleration amid slower household consumption growth (due to last year's VAT hike) and slower than expected budget spending on infrastructure projects. This year, we project GDP growth of 2%, as the negative factors from last year will fade away and the government should show improvement in meeting its spending targets.
27​ RUSSIA Country Report​ March 2020 ​ ​www.intellinews.com