Page 24 - RusRPTJul19

3.2 Macro outlook
Russia's economic growth was reported at 0.5% y/y in 1Q19. Sberbank had expected the weakest y/y growth this year would come in the first quarter, with subsequent quarters seeing an improvement. The major drivers for that will be increased investment activity. The growth will be spurred by higher budget spending to finance the so-called National Projects, which will boost construction. So at this point economists do not see any reason to alter the 2019 economic growth forecast of 1.5%.
Fitch Ratings downgraded Russia's GDP growth forecast for 2019 from 1.5% to 1.2%, following unexpectedly weak economic performance in the first quarter. The agency still believes the GDP growth to accelerate to 1.9% in 2020 and 2021, as the government's spending is expected to kick, while slowing inflation and waning effect of the VAT hike is hoped to push slowing consumption. As analysed by bne IntelliNews, the Russian economy is stagnating in the beginning of 2019 and Russian President Vladimir Putin’s plan to revitalise it with the 12 national projects is off to a very slow start.
The World Bank (WB) has cut the 2019 GDP growth outlook for Russia from 1.5% to 1.2% in the latest Global Economic Prospects report. This makes the second time Russia's GDP growth forecast for 2019 was cut by the bank. "The projection for 2019 has been downgraded to 1.2%, reflecting oil production cuts," the WB commented, adding that "tighter monetary policy, combined with a value-added tax hike at the beginning of 2019, are also contributing to weaker growth momentum in the remainder of 2019." The industrial activity slowed at the start of 2019, as compliance with agreed upon oil production cuts took effect as a non-OPEC partner. Retail sales volume growth also declined with the onset of the value added tax hike, the WB warns.
24 RUSSIA Country Report July 2019 www.intellinews.com