Page 28 - RUSRptOct18

However, in 1Q18, saw the reverse: while residential construction added +19.6% y/y, the value added by construction declined 5.1% y/y, reflecting the high base in large scale projects, such as the finalisation of World Cup related activities.
In other non-tradables, bankers saw sizable contributions coming from wholesale & retail trade (+0.27pp) and transportation & storage (+0.25pp). The output gains in these industries recovered after a temporary slowdown in 1Q18.
Manufacturing accelerated visibly to 2.8% y/y vs. 1.9% in 1Q18. This recovery was foreshadowed by industrial production statistics, as in April-May manufacturing output gains were as much as 5.3-5.4% y/y. The material upward revision of the manufacturing growth trajectory in 2017-18 could well be the reason for further adjustments in the headline GDP growth.
3.2 Macro outlook
The Ministry of Economic Development worsened Russia's short-term economic outlook as expected due to volatility on emerging markets, worsened sanction risks, faster capital outflow and rising cost of debt.
Now the GDP forecast for 2018 was clipped from 1.9% to 1.8% growth, with 2019 outlook down from 1.4% to 1.3%. Target ruble exchange rate to US dollar was hiked from RUB60.8 to RUB61.7 for 2018 and from RUB63.2 to RUB63.9 for 2019 due tougher Fed policy, Turkish crisis, and the sanction risks.
The ministry also more than doubled capital outflow forecast from previous $18bn to $41bn and last week worsened inflation forecast from 3.1% to 3.4% for 2018. In August CPI inflation already reached 3.1% year-on-year.
This is the second time the ministry has downgraded the outlook in less than three months. In June it revised its 2018 GDP growth forecast down to 1.9% from the previous 2.2% outlook, while expecting 2019 economic growth to slow down to 1.4% .
28 RUSSIA Country Report October 2018 www.intellinews.com