Russia: GDP plummets in Q2 amid Covid-19
According to a preliminary estimate released by Rosstat on 11 August, GDP plunged 8.5% in annual terms in the second quarter, swinging from the first quarter’s 1.6% expansion and marking the worst reading since Q3 2009. That said, the result was above market expectations. Although a breakdown by components is not yet available, the downturn was likely broad-based as a strict lockdown at home hammered the domestic economy, while the external sector suffered from halted foreign demand and depressed oil prices.
Looking ahead, activity is seen slowly improving in the coming quarters as containment measures are relaxed, borders reopen and global trade picks up. However, still-low oil prices and limited production will weigh on the external sector, while investment will likely be hampered by the uncertain economic panorama.
Commenting on Oxford Economics’ outlook for Russia, senior economist Evghenia Sleptsova adds:
“First estimates of an 8.5% GDP decline in Q2 are as bad as the recession will get, with early data showing smaller drops of -6.4% y/y in June and -4.7% in July. This keeps the economy on course for a 4.9% full-year decline, factoring in a likely setback to industrial recovery in Q4 due to localised Covid-19 flare-ups after the Q3 relaxation of lockdown measures. GDP growth is then forecast to rebound above recent trends to 2.7% in 2021, with a subsequent slowdown to around 2% in 2023.”