Page 40 - RusRPTMay21

Rosstat released its second GDP estimate for 2020 on April 1. While the first estimate lacked quarterly distribution, the second estimate provided a breakdown by quarterly production and expenditures.
Overall, the estimate was revised upwards 0.1ppts from a contraction of 3.1% y/y to 3% y/y, which was not broadly expected by Bloomberg consensus, and the 4Q20 estimate was better than expected (-1.8% y/y vs. consensus expectations of -2.2% y/y).
On a quarterly basis, the economy contracted 7.8% y/y in 2Q20, when the most stringent lockdowns were introduced. The economy has been recovering since then, declining 3.5% y/y in 3Q20 and 1.8% y/y in 4Q20.
On the production side, the largest impact came from lower demand for energy and the lockdowns, which the contraction in the mining and quarrying industry (-9.5% y/y) reflected, contributing 0.8ppts to the overall decline. Services activities also saw drops, e.g. accommodation and food services (-24.5% y/y), entertainment and recreation (-11.4% y/y), and transportation (-10.6% y/y). The support came from financial and insurance services (+7.3% y/y) and real estate (+1.2% y/y), as well as public administration, defence and social security (+2.3% y/y). On a quarterly basis, almost all sectors exhibited recovery dynamics after 2Q20, especially those related to services as well as manufacturing (-7.2% y/y in 2Q20 vs. +2% y/y in 4Q20). The mining and quarrying sector remained under pressure in 4Q20 on the back of subdued output.
On the expenditure side, the lockdowns triggered a 4.4% y/y contraction in domestic demand, with household consumption down 8.7% y/y. The fiscal stimulus compensated for this, with government expenditures rising to 4% y/y. Fixed asset investments fell 4.3% y/y, with overall capital formation falling just 2%, implying a re-stocking. While exports were down 4.3% y/y, import demand fell 12% y/y on the back of lockdowns, an inability to travel and a weaker ruble. On a quarterly basis, the contraction in household consumption eased from 21.7% y/y in 2Q20 to 9.1% y/y in 3Q20 and 5.7% y/y in 4Q20. Fixed investments saw similar dynamics (-2.1% y/y in 4Q20 vs. -9.6% y/y in 2Q20), with inventories rising significantly by YE20. While exports remain subdued in 4Q20 (-6.5% y/y vs. -8.1% y/y in 3Q20), import demand also recovered from a contraction of 22.6% y/y in 2Q20 to a contraction of 5.5% y/y in 4Q20.
“COVID-19 affected Russia’s economy less than expected for several reasons. First, Russia’s small share of SMEs (compared to the substantial percentage of large and public companies) weathered the contraction, smoothing the shock to unemployment and salaries (disposable income fell 3.5% y/y, but wages were up 2.4% y/y in 2020). Second, targeted fiscal support and CBR's accommodative monetary policy contributed to the less severe decline. Third, Russia is largely insulated from global supply chains, which facilitated the
40 RUSSIA Country Report May 2021 www.intellinews.com