Russia: Recession eases in Q2
August 11, 2016
The Russian economy experienced the slowest contraction in Q2 since it began to contract at the beginning of 2015. A preliminary estimate released by the Federal Statistics Service (Rosstat) on 11 August showed that GDP decreased 0.6% year-on-year in Q2. The result followed the 1.2% contraction registered in Q1 and represented the slowest fall in Russia’s overall output since it began to contract in Q1 2015. Q2’s result fared better than the 0.8% contraction analysts had expected and was in line with the Ministry of Economic Development’s estimate.
The Statistical Office did not release a detailed breakdown of data, but additional economic information suggests that investment, which had plummeted in previous quarters, is approaching a turning point as capital-intensive industries come to life and oil prices continue to recover. Household consumption, which fueled Russia’s economic recovery after the 2008–2009 global financial crisis, continued to languish, but, according to the Ministry of Economic Development, agricultural output, industrial production and transportation services contributed to a softer economic contraction in Q2.
The Central Bank expects that GDP will show positive growth in the third quarter, stating that, “expectations for the beginning of a slow economic recovery in the third quarter have strengthened.” The Bank added that, “the economy is expected to enter a trajectory of slow growth in nearest months if there’re no new external shocks.”
Considering that the price for Urals Oil will average USD 38 per barrel in 2016, the Central Bank expects the economy to contract between 0.3% and 0.7%. The 2016 GDP growth forecast was revised up from the Bank’s previous estimate that saw the economy contracting between 1.3% and 1.5%. Furthermore, the Bank expects the economy to expand at a rate of between 1.1% and 1.4% in 2017, assuming that Urals Oil prices average USD 40 per barrel. Previously, the Bank had expected the price for Urals Oil to average USD 35 per barrel and had projected economic growth rising to within a range of minus 0.5% and plus 0.5% in 2017.
Author: Ricardo Aceves, Senior Economist