Page 23 - bne IntelliNews Russia Country report May 2017

3.0 Macro Economy
3.1 Macroeconomic overview
Russia’s GDP expanded by 0.5% year-on-year in the first quarter of 2017,
the Rosstat state statistics agency reported on May 17. This made the second consecutive quarter of economic expansion following 0.3% growth seen in the fourth quarter of 2016.
The 0.5% growth exceeded the 0.4% expectations of the economy ministry and the Central Bank of Russia’s forecast of 0.2-0.4% growth.
Earlier the economy ministry revised the outlook for 2017 upwards,
expecting 2% GDP growth in 2017, which is more optimistic than the international and domestic consensus.
In its latest outlook update, the European Bank for Reconstruction and Development (EBRD) sees Russia’s GDP growth at 1.2% and 1.4% in 2017 and 2018, respectively.
After a cumulative contraction in 2015-2016 of 3%, the bank expects the Russian economy to “grow modestly in 2017 and 2018”, supported by a gradual recovery in oil prices and within the estimated longer-term potential growth rate of 1-2% annually.
Despite the recovery, investment activity has remained constrained by economic uncertainty and relatively high financing costs.
In April, the International Monetary Fund (IMF) revised Russia’s GDP growth forecast to 1.4% for 2017 and 2018 , up from 1.1% and 1.2% expected previously.
“The pickup in activity reflects firming oil prices and a recovery in domestic demand attributable to easing financial conditions and improved confidence,” the IMF said.
At the same time, Russia’s potential growth is seen as being capped at 1.5% without reforms , the Fund noted, slowing a convergence towards advanced economy per capita income levels. Such reforms would include diversification of the economy, accelerated institutional reforms, and an improved business climate.
23 RUSSIA Country Report May 2017 www.intellinews.com