Russia: Economy returns to growth in 2017
A preliminary estimate released on 2 February revealed that the Russian economy rebounded last year, with GDP growing 1.5%. The result contrasted 2016’s 0.2% contraction but was below market analysts’ estimates of a stronger 1.7% expansion. Details for the final quarter of the year and possible revisions to Q1–Q3 are expected to be released around the end of March. However, the result indicates that growth likely slowed notably in the fourth quarter, despite benefiting from higher oil prices.
An improved domestic economy drove last year’s recovery amid recovering confidence, easing financial conditions and a healthy labor market. Private consumption grew 3.4% in 2017, contrasting 2016’s 2.8% fall. Fixed investment growth picked up notably to 3.6% (2016: +0.8%). However, government consumption contracted, falling 0.9% (2016: +0.9%), as authorities focused on narrowing the fiscal deficit.
Exports also gained momentum last year, thanks to higher commodity prices and a supportive global backdrop. Exports surged 5.4% in 2017, above 2016’s 3.2%. However, a recovering domestic economy fueled higher demand for imports as well. Imports soared 17.0%, swinging from 2016’s 3.6% contraction.
Looking ahead, the economy’s moderate recovery should continue this year, benefiting from monetary policy easing, higher oil prices and healthy household consumption. The production cut deal with OPEC will, however, keep oil output limited, capping the country’s export performance. Fresh economic sanctions pose a downside risk to Russia’s outlook, as some members of the United States government call for new measures.