Page 5 - RusRPTFeb20
P. 5
1.0 Executive summary
Russia’s economic performance in 2019 remained mixed and growth disappointingly low. While the end of year numbers are not out yet the economy is expected to have grown by about 1.3%. the forecasts for the year were downgraded several times and will come in well below the 2.3% surprise result in 2018.
The forecast for full year 2020 growth is equally uncertain with a broad range of predictions running from 1.3% to 2.6%. Everything will depend on oil prices and how well the new government appointed in January is at implementing the national projects.
Rosstat’s data showed an uneven picture of the economy in 2019, with agriculture and industry growing at a healthy pace, the consumer sector showing improvements towards the end of 2019. The all important economic drivers of construction and investment activities were near stagnation, but consumption at least, the third big economic driver, started to improve in the last quarter as real incomes finally began to grow again.
Growth in the real sector of the economy continues. The last month of 2019 saw an acceleration in industrial output along with strong growth in agriculture, which allowed these two segments of the economy to post healthy growth: industry was up 2.4% y/y in FY19 and agricultural production rose 4.1% y/y in 11M19.
However, industrial production remains relatively weak, but that was partly compensated for by higher growth figures for agriculture (5.8% y o-y, compared with 5.2% in November), retail trade (2.3% versus 1.7%) and wholesale trade (9.4% versus 8.4%). An improvement in wholesale trade (up 9.4%), retail trade (up 2.3%) and agriculture (up 5.8%) partly compensated for the slowdown in industrial production.
Investment activity remains weak. However, the situation in other segments of the real economy was far less upbeat: cargo transportation increased by just 0.6% y/y in FY19 (but fell 1.7% y/y in December) and the volume of services to the population contracted by 0.9% y/y in 2019.
The most disappointing of the sectors was construction. House sales was showing signs of life but this has not fed through into construction year: volumes in 2019 rose by just 0.6% y/y (v 6.3% in 2018). There was some improvement in housing activity, with FY19 growth at 4.9% y/y (but in December, volumes fell by 6% y/y).
Consumer slowly comes back to life. In the consumer segment, the dynamic improved markedly during 4Q19 when volumes of retail sales rose by 2% y/y v 0.9% in 3Q19. In FY19, retail trade expanded by 1.6% y/y (v 2.8% in 2018). Population incomes also continued to grow: while in 1Q19, real incomes fell 0.8% y/y due to the VAT hike and pension reform, in 3Q19, they jumped by 3.7% y/y, but then decelerated to 1.1% y/y growth in 4Q19. In 2019, real disposable income was up 0.8% y/y, while real wages increased by 2.5% y/y.
5 RUSSIA Country Report February 2020 www.intellinews.com
