Page 61 - RusRPTApr24

3.1 Macroeconomic overview
Economic growth remains strong. GDP growth in January amounted to 4.6% y/y (after +3.6% at the end of 2023), supported by manufacturing and wholesale trade. The current seasonally adjusted industrial production growth rate in January was 0.7% m/m, while the manufacturing and services PMI indices remained above neutral in January-February (although on average slightly below 4Q23).
Meanwhile, the labour market remains tight, with the unemployment rate falling again to 2.9% in January (2.8% seasonally adjusted, the absolute minimum).
Against this background, consumer activity is supported by the growth of real disposable income - at the end of 2023, it increased by 5.4% y/y, which allowed it to approach the 2014 level. Taking into account the high base of last year, the economic growth rate in annual terms will begin to decline in March. Taking into account the combined effects of fiscal and monetary policy, while external uncertainty remains, 2H24 may become a period of noticeable cooling of the economy.
Although its economy is very vulnerable, Moscow has no financial incentive to stop the war. Russian President Vladimir Putin may reconsider his position on continuing the war against Ukraine if the West can squeeze Russian oil revenues, according to a Reuters study. Despite the sanctions and restrictions, Russia had a positive trade balance of $51B last year. The situation may change if Ukraine's allies can reduce Russia's export earnings to the extent that it would lead to a deficit in the balance of payments. Exports could fall by $80B. However, the Russian Federation may refuse to sell oil at even lower prices and limit production. This will lead to an increase in global prices, which will hurt India and Ukraine's allies, who are unwilling to take necessary risks to reduce Russian revenue streams. Until they do, Putin has no financial pressure to end the war. However, The Hill notes that the Russian economy is not that strong, and the country is very financially vulnerable if energy prices fall or an increase in the production of military equipment leads to a reduction in production in other areas.
The BRICS countries have already surpassed the G7 in some macroeconomic indicators and this gap will widen further, Kremlin aide Yury Ushakov said in an interview with TASS.
"By the way, BRICS has already surpassed the Group of Seven in terms of purchasing power parity: the group accounts for 35.6% of the global GDP, while the G7 accounts for 30.3%. By 2028, the situation will evolve further in BRICS favor: 36.6% versus 27.8%," Ushakov said.
61 RUSSIA Country Report April 2024 www.intellinews.com