Page 39 - RusRPTMay21

Even so, another important indicator of consumer demand – the volume of paid services to the population – posted 1.4% y/y growth in March, thus signalling that the pandemic-driven recession in the consumer area is finally ending.
Volumes of residential construction jumped 19.8% y/y – the highest rate in 6 years – while real wages rose 2% y/y in February. The unemployment rate last month dropped to 5.4% from 5.7% in February and the peak level of 6.4% in August 2020.
Accelerating economy could spark a further rise in inflationary pressure. Overall, March data shows that the economy has finally returned to growth – the Economy Ministry estimates that GDP increased by 0.5% y/y last month.
This is obviously positive, especially as this growth comes one month earlier than we expected. A shift in the base factor in April will lead to significant y/y gains in all macro indicators, with the only possible exception being the oil industry where production remains capped due to the OPEC+ deal.
However, this good news also comes with a downside – in the coming months, rising consumer demand will add to the already high inflationary pressures.
The other two risk factors for inflation control include a weaker RUB rate and a potential rise in public spending ahead of September parliamentary elections. Together, these factors will continue to force the CBR to pursue conservative monetary policies – we expect the bank to deliver a 25bp rate hike when it meets on Friday, 23 April. It is also possible that we could see another similar rate hike in June or in 3Q21.
Russia’s economy fared much better in the last quarter of last year than expected, according to the state statistics agency revised figures released on April 1.
Rosstat’s second GDP estimate for 2020 points to an even shallower contraction of 3% y/y in 2020. On a quarterly basis, the recovery momentum continued into 4Q20, with GDP bouncing back from a 7.8% y/y contraction in 2Q20 to contractions of 3.5% y/y in 3Q20 and 1.8% y/y in 4Q20.
While energy exports remain depressed on the back of OPEC+ supply constraints, the domestic economic rebound was acute in 3Q20 and 4Q20 in terms of household expenditures and service industry activities.
“In 2021, we expect GDP to grow 2.5% y/y. The base effects of a less severe decline in 2020 combined with an aggressive fiscal consolidation and further COVID-19 outbreaks create downside risks to our scenario. Additional fiscal stimuli via relief packages and infrastructure spending could produce upside potential to our FY21 forecast,” Sova Capital said.
39 RUSSIA Country Report May 2021 www.intellinews.com