Russia Economic Outlook
GDP jumped 4.9% year on year in Q2, marking the first expansion since Q1 2022. Industrial output rebounded strongly in Q2, thanks to recovering manufacturing activity, while a tight labor market and higher wage growth boosted retail sales. Moreover, a loose monetary policy stance, low inflation and elevated government spending likely boosted domestic demand. Upbeat growth momentum seems to have carried over into Q3. In July, economic activity climbed 5.0% yoy, supported by sustained growth in the industrial and retail sectors. Meanwhile, PMI data suggests private sector activity continued to expand in July, albeit at a slower rate than the Q2 average. Less positively, a resurgence in inflationary pressure and a rapid depreciation of the ruble forced the Central Bank to markedly tighten monetary conditions in August. This, coupled with falling oil output, bodes ill for economic activity.
Russia Inflation
Inflation rose to a five-month high of 4.3% in July (June: 3.2%). This was due to faster price growth for both food and non-food goods, which more than offset cooling services inflation. Inflation is forecast to rise further by year-end, partly on a weaker ruble, although aggressive monetary policy tightening by the Central Bank of Russia (CBR) should keep it in check.
This chart displays Economic Growth (GDP, annual variation in %) for Russia from 2013 to 2022.