Russia: Economy manages to eke out timid growth in 2014
February 2, 2015
According to the flash estimate published by the Federal State Statistics Service (Rosstat) on 2 February, GDP increased 0.6% in the full year 2014. The result was less than half the growth rate recorded in 2013, when the economy expanded 1.3%. The result came in slightly over the 0.4% the markets had expected.
The annual reading reflected an overall slowdown. Private consumption decelerated from a 5.0% increase in 2013 to a 1.9% expansion in 2014. Government consumption grew 0.5% in 2014, less than half the 1.1% growth rate tallied in the previous year. Meanwhile, gross fixed investment deteriorated notably in 2014. It contracted 2.5%, which contrasted the 1.4% rise observed in 2013.
On the external front, exports of goods and services contracted 2.0% in 2014, contrasting the 4.6% increase tallied in 2013. Imports swung from a 3.8% increase in 2013 to a 6.8% contraction in 2014.
At the sector level, agriculture and manufacturing slowed in 2014. Agriculture decelerated from a 4.3% rise in 2013 to a 1.4% expansion. The manufacturing sector increased 2.5% in 2014 (2013: +3.9%). In addition, services fared worst compared to the previous year.
Based on full-year figures, the economy is likely to have shown flat growth in Q4 2014 in year-on-year terms, which, if confirmed, will mark the slowest rate since Q1 2010.
Due to the sanctions imposed by Western economies, the rapid depreciation of the Russian currency and expectations of low oil prices this year, Finance Minister Anton Siluanov told media that the economy could contract 3.0% in 2015.
Meanwhile, the Central Bank expects economic growth “to be close to zero” in 2015, under a baseline scenario, in which the Bank projects the price-per-barrel for Ural oil to average USD 80. Under this scenario, the Bank expects economic growth to deteriorate and sees GDP growth falling between 0.6% and 0.8%. Under a worst-case scenario, in which the Bank sees the price for Ural oil averaging USD 60, monetary authorities expect the economy to contract between 4.5% and 4.7% in 2015.
Author: Ricardo Aceves, Senior Economist