Russia: Comprehensive data confirms the recovery strengthened in Q2
October 2, 2017
Detailed data released by the Federal Statistics Service (Rosstat) on 2 October confirmed that activity picked up steam in the second quarter. GDP expanded 2.5% annually in Q2, in line with the preliminary estimate and above Q1’s 0.5% expansion. The figure marked the highest growth rate since Q3 2012 and shows that the economy is on the mend, following a prolonged recession due to low oil prices and Western sanctions.
Domestic demand underpinned Q2’s acceleration, highlighted by multi-year high growth rates for private consumption and fixed investment. Private consumption soared 4.4% annually in Q2, benefitting from an improving labor market and easing price pressures (Q1: +2.7% year-on-year). Fixed investment skyrocketed 6.3%—the best result in nearly five years—likely due to large-scale transportation and energy projects. Meanwhile, government spending remained subdued overall, inching up from Q1’s 0.4% increase to 0.5%.
The strength of the domestic economy led to a sharp increase in imports, which dampened the external sector’s impetus. Imports grew 20.7% annually in Q2, above Q1’s 16.5% increase. Meanwhile, export growth disappointed, waning from 7.1% in Q1 to 3.3% in Q2. However, export growth should pick up in the third quarter, thanks to higher commodities prices and healthy external demand.
Overall, the economy should continue to gain traction in the quarters ahead thanks to recovering confidence, low inflation and looser monetary policy. The trajectory of oil prices will be key to the outlook and could represent an upside or downside risk to growth.