Page 71 - RusRPTJun24

3.1 Macroeconomic overview
The annual growth rate of the Russian GDP turned out to be higher than predicted in the first quarter of 2024 and stood at 5.4%, Central Bank analysts said in the trends bulletin. "The GDP annual growth was 5.4% in the first quarter; turning out to be 4.5-4.8% with the adjustment by an extra day in the leap year of 2024. Quarterly growth of GDP evolved higher than in the fourth quarter of 2023," analysts said. "Flash data of April are somewhat less positive but nevertheless point to continuing growth of the Russian economy as regards consumption of households and in terms of the investment activity," they added.
Rosstat revised 2022 real GDP growth up to -1.2% (from -2.1%) and reported 2023 growth at 3.6%.
Russia’s economy was running hot in the first quarter, as inflation pressures build further. The 5.4% y/y rise in Russian GDP in the first quarter was a touch stronger than expected and, taken together with the rise in inflation in April, adds further evidence to the view that the war effort is causing the economy to overheat.
There’s no breakdown of the GDP data yet but the latest monthly activity data show that industrial production and retail sales grew at their fastest annual pace in more than a decade last quarter. We estimate that growth remained strong at more than 1.0% in seasonally-adjusted q/q terms.
Meanwhile, inflation data released today showed that the headline rate edged up from 7.7% y/y in March to 7.8% in April, with prices rising by 0.5% m/m (in line with consensus). Food and goods inflation rose again last month. Perhaps the main concern for the central bank will be the fairly strong 0.7% m/m rise in core consumer prices, which pushed the y/y rate up from 7.8% in March to 8.3%.
The indicators that we track suggest that the strength of GDP and inflation continued into the second quarter. The manufacturing PMI and the central bank’s business sentiment indicator remained near multi-year highs in April. And the latest weekly inflation figures suggest that Russia is on track for inflation to breach 8.0% y/y this month.
Some slowdown in GDP growth is likely in the coming quarters but the fiscal stance is very supportive and our forecast remains for above-consensus GDP growth of 3.5% this year. We doubt that inflation will fall as quickly as the central bank expects too, ending this year at 5.3% y/y (central bank: 4.3-4.8%). Against this backdrop, the central bank is likely to maintain its hawkish stance and keep interest rates at 16.00% for some time.
71 RUSSIA Country Report June 2024 www.intellinews.com