Russia: Economy picks up steam in Q1
June 30, 2017
The Russian recovery continued to pick up steam at the start of 2017 according to comprehensive data released by the Federal Statistics Service (Rosstat) on 30 June. GDP expanded 0.5% annually in the first quarter, in line with the preliminary estimate and above Q4’s 0.3% expansion. The figure marked the second consecutive quarterly expansion and shows that the economy is gradually on the mend, following a prolonged recession due to low oil prices and Western sanctions.
Domestic households and firms underpinned Q1’s expansion. Private consumption grew at a solid pace (Q1: +2.7% year-on.year; Q4: -3.2% yoy), thanks largely to growth in real wages, while fixed investment rose as firms were likely aided by a looser monetary policy and growing confidence regarding the economy (Q1: +2.3% yoy; Q4: -0.3% yoy). Government consumption also returned to growth (Q1: +0.4% yoy; Q4: -0.5% yoy).
In the external sector, exports rebounded significantly in the first quarter, thanks to an uptick in oil prices (Q1: +7.1% yoy; Q4: +3.7% yoy). However, imports rose by an ever greater amount (Q1: +16.5% yoy; Q4: +0.3% yoy), eroding the external sector’s contribution.
The economy should continue to gain traction in the quarters ahead thanks to recovering confidence and stabilizing inflation. However, the trajectory of oil prices will be key to improving government finances and jump-starting growth.