Page 42 - bneIntelliNews monthly country report Russia May 2024

3.1 Macroeconomic overview
In February 2024, GDP exceeded the level of the previous year by 7.7% year-over-year after an increase of 4.6% year-over-year in January.
The growth of industrial production in February 2024 accelerated to 8.5% year-over-year after 4.6% year-over-year in January.
The manufacturing industry returned to double-digit growth rates: 13.5% year-over-year after 7.5% year-over-year in January.
The growth of retail trade turnover in February accelerated to 12.3% in annual terms in real terms after 9.1% in January.
The mining industry, by the end of February, added +2.1% year-over-year after +0.8% year-over-year in January.
The growth rates are so good that it's even surprising; a 2% GDP growth for 2024 will confidently be realised.
The 4.9% y/y rise in Russian GDP in Q4 was slightly below expectations but it followed an upwards revision to growth in Q3 (to 5.7%) and suggests that the economy continued to run hot at the end of last year. In seasonally-adjusted q/q terms we estimate that GDP expanded by around 1.0%, which is far above Russia’s potential growth of 0.3% or so. The production breakdown showed that strength was concentrated in manufacturing and services and the expenditure breakdown showed a rise in fixed investment growth to 8.1% y/y.
The latest data for this year suggest that the economy continued to motor along in Q1. Industrial production growth unexpectedly accelerated to 8.5% y/y in February and retail sales growth surged to 12.3% y/y. The manufacturing PMI for March this week came in at its strongest in eighteen years. It’s hard to emphasise just how strong these data are and the overall story is that Russia’s economy is clearly booming, in large part due to the war effort. The March activity figures will provide a clearer read on Q1 but it looks like GDP growth re-accelerated to above 5% y/y.
The GDP figures and latest activity data support our above-consensus GDP growth forecast of 3.5% for this year and our view that overheating risks in the economy have continued to intensify. With spare capacity almost non-existent, inflation pressures will remain strong throughout the year. The clear risk for the inflation outlook is that the government steps up the war effort even further.
This is the lowest indicator, according to Rosstat data, for the post-Soviet period of economic statistics. For comparison, the share of exports at the end
42 RUSSIA Country Report May 2024 www.intellinews.com