Page 35 - RusRPTApr20

3.0 Macro Economy 3.1 Macroeconomic overview
Russia's gross domestic product (GDP) rose by 2.3% in January– February and the economy has so far been developing in line with the forecasted trends, Finance Minister Anton Siluanov said at a government meeting on March 21.
"We see that in accordance with the data of the economy ministry, the economy has so far been developing in accordance with the trends that we’ve planned. Economic growth amounted to 2.3% in the two months. The budget was also spent in accordance with the plan over the last two months," Siluanov said.
Basic sector output growth slowed to 1.8% y/y in January in light of weaker industrial and agricultural output and wholesale trade and transport volumes, which reflected a decline in external demand. Meanwhile, domestic-oriented sectors - retail trade, construction and some manufacturing sub-sectors - were bolstered by an increase in budget spending and higher income growth.
Basic sector output growth slowed to 1.8% y/y in January from 2.4% in December. The deceleration was mainly attributable to industrial output (growth slowed to 1.1% from 1.7% in December on the back of a 0.4% y/y drop in mining and quarrying output), agricultural output (which grew by just 2.9% following 5.6% growth in December), wholesale trade (which expanded 7.9% in January versus 10.6% growth in December) and transportation volumes (which contracted 4.4% compared with a 1.3% decline the previous month).
On a positive note, domestic-oriented sectors - retail sales, construction and some manufacturing sub-sectors - showed some improvement, reflecting a pickup in domestic demand thanks to positive real income dynamics and increased budget spending.
Additional social spending and national project spending catching up with the targets should provide further support for the economy this year. The additional social spending (R380bn this year) announced by President Vladimir Putin earlier this year (the actual cash payments will commence at the start of 2H20) will support the trade, construction and manufacturing sectors this year, as will increased budget spending on the national projects (total expenditures were up 53% y/y in January), as the government is trying to catch up with its spending targets.
Investment growth has been revised upward for last year. The State Statistics Service has published detailed investment data for 2019 (excluding military and R&D-related spending). Investment rose 1.7% last year, though the service has also upgraded the 9m19 growth figure to 1.3% from the initial estimate of 0.7%. We therefore expect the total investment growth figure (which includes military and R&D spending) to also be revised upward from the initial estimate of 1.4%.
Key macroeconomic indicators (pre-coronavirus impact)
35 RUSSIA Country Report April 2020 www.intellinews.com