Russia: GDP contracts at sharpest rate in over a decade in 2020
The economy contracted 3.1% year-on-year in 2020, according to a preliminary national accounts estimate released by Rosstat on 1 February. The result contrasted the previous year’s revised 2.0% expansion (previously reported: +1.3% yoy) and marked the sharpest contraction since 2009. That said, although quarterly data is not yet available, full-year figures suggest that GDP fell at a slightly softer pace in Q4 2020, following Q3’s 3.4% decline.
The full-year contraction was spearheaded by a significant downturn in domestic demand due to the constraining effects of the pandemic. Private consumption nosedived 8.6% annually in 2020, contrasting 2019’s revised 3.2% increase (previously reported: +2.5% yoy) and marking the worst result in five years. Similarly, fixed investment dived 6.1% in 2020, after rising 1.5% in the previous year. On a more positive note, public consumption gained steam and was up a record 4.0% in 2020, from 2.4% in the previous year (previously reported: +2.2% yoy), amid the government’s fiscal spending program.
On the external front, conditions were similarly bleak as the sector reeled from eviscerated external demand, depressed global energy prices and constrained domestic oil output. Exports of goods and services fell at the sharpest pace since current records began in 2004, plunging 5.1% in 2020, compared to a 0.9% uptick in 2019 (previously reported: -2.3% yoy). Meanwhile, imports of goods and services dived at a much sharper rate of 13.7%, swinging from the previous year’s 3.5% increase (previously reported: +3.4% yoy) and marking the worst result in five years.
Looking ahead, the economy is expected to gradually recover in the coming quarters as the vaccination program gathers momentum and pandemic-related restrictions are gradually removed. Rebounding consumer demand and a healthier external backdrop are set to spearhead the recovery, with fiscal and monetary stimulus expected to further support the upturn.
Commenting on outlook for this year, economists at Goldman Sachs appear upbeat, noting:
“In 2021, we continue to expect growth to surprise consensus and policymakers on the positive side, and we forecast growth of 5.0%yoy vs consensus expectations of 3.1%yoy, mainly driven by stronger exports, based on oil production reaching pre-COVID levels in 2021H2.”
In contrast, Artem Zaigrin, economist at SOVA capital, is somewhat more cautious, saying:
“Going into 2021, the pace of vaccinations could be one of the most important drivers for the resumption of economic activity and the government’s efforts to facilitate the economic recovery. The base effects of a less severe decline in 2020, a more aggressive fiscal consolidation and additional waves of COVID-19 if herd immunity is not reached could lead to downside risks to our 2021 GDP forecast of 2.8% YoY growth. We expect the economy to return to positive YoY growth rates starting from 2Q21”.