Page 20 - RusRPTFeb20

3.0​ ​Macro Economy 3.1 ​Macroeconomic overview
The Russian economy lost some momentum at the end of the fourth quarter.​ December’s batch of Russian activity data suggests that GDP growth in Q4 was broadly unchanged from Q3’s 1.7% y/y, but the economy appears to have lost steam at the end of the quarter. That strengthens the case for the central bank to cut interest rates by 25bp, to 6.00%, at the January board meeting.
Data published earlier this week showed that industrial production growth picked up from 0.3% y/y in November to 2.1% y/y in December. Stronger growth in the manufacturing and mining sectors more than offset a slump in utilities output. (See Table 1.) Meanwhile, figures released today showed that the agriculture sector continued to record robust growth. But construction activity remained relatively sluggish. And retail sales growth came in at a much weaker-than-expected 1.9% y/y (consensus: 2.6%). Despite a sharp drop in inflation last month, real wage growth slumped from 3.8% y/y in November to 2.7% y/y in December.
On balance, the latest data suggest that GDP growth in Q4 was broadly in line with Q3’s outturn of 1.7% y/y. Following the weak start to the year, we think that figures due to be released next week will show that Russia’s economy expanded by around 1.2% over 2019 as a whole.
That said, the economy does seem to have lost some steam towards the end of Q4. And with the unwinding impact of last year’s VAT hike likely to push inflation down to below 2.5% y/y this month, this is likely to strengthen the case for monetary easing at next week’s central bank meeting.
Sluggish growth is also likely to make the new government more inclined to
20​ RUSSIA Country Report​ February 2020 ​ ​www.intellinews.com