Page 6 - RusRPTJun21

1.0 Executive summary
Russia’s economy continued to recover in the first three months of this year. Although January and February posted negative growth the moment was clearly already growing on the returning optimism as the coronavirus pandemic recedes.
Growth turned positive in March and the State Statistics Service revised its estimate for the first quarter growth and improved its reading to a 1.0% y/y contraction against the 1.8% y/y contraction in 4Q20.
Russia's seasonally adjusted GDP started to contract already in the second half of 2019, ie before the corona pandemic. In the fourth quarter of 2020, GDP was 4.2% lower than in the second quarter of 2019. This says that the Russian economy is suffering from problems other than the corona.
Since then the mood amongst businesspeople has become very buoyant as the Russian business confidence survey run by Rosstat every month has turned positive for the first time in eight years, and for the second time ever. The index was at zero in April, after it was knocked off its feet by last year’s coronacrisis. However, it fell to a low of -7.3 in November, which is less than the -8 of the previous two years its fall offset to an extent by the appearance of the first vaccines to counter the coronavirus (COVID-19) pandemic. The only other time the index has been positive was for eight months during the height of the noughties boom in 2006 and 2007, before the 2008 crisis knocked the index back to its all time low of -20.
In April, industrial production grew by 7.2% year on year. In the first quarter, the annual change was still −0.9%. In the coming months, the annual changes in many economic variables will be high, because in the spring of 2020 the Russian economy also suffered e.g. many measures restricting economic activity and movement.
In April, however, seasonally adjusted industrial production was unchanged from March. The annual growth came mainly from the manufacturing industry, whose production was 14.2% higher than last year. Production in the extractive industries decreased by 1.8% as the OPEC + agreement continues to limit Russian crude oil production. The annual change in oil production was −5.7% in April.
The Russian labour market is also showing clear signs of recovery. In April, the unemployment rate was only 5.2%, after peaking at almost 6.5% last autumn. The Russian labour market has traditionally been quite flexible, which has helped keep unemployment low. The employment rate is still somewhat lower than at the end of 2019.
The story is playing out more or less as bne IntelliNews speculated it would in our cover story “Brighter Days Ahead” in December, which argued that as the pandemic recedes, following the start of vaccine production in November, the release of the pent up demand would provide a strong positive jolt to
6 RUSSIA Country Report June 2021 www.intellinews.com