Russia: GDP plunges in Q2 as Covid-19 hammers activity
According to a second estimate released by Rosstat on 9 September, GDP plunged 8.0% year-on-year in the second quarter. Although the revised result marked an improvement from the preliminary estimate of a 8.5% contraction, it still marked a notable deterioration from Q1’s 1.6% expansion and the sharpest downturn in activity since Q3 2009. Moreover, the economy shrank 3.2% in quarter-on-quarter seasonally-adjusted terms (Q1: -0.9% qoq sa).
Q2’s annual contraction largely reflected plummeting activity in the mining, manufacturing, and wholesale and retail trade sectors, which were hit extremely hard by the Covid-19-induced shock. That said, agricultural production and public spending fared better, softening the overall blow.
Looking ahead, the economy is expected to gradually recover in the coming quarters as the pandemic subsides. That said, still-low global oil prices, geopolitical risks, eviscerated consumer and business confidence and a prolonged health crisis all cloud the outlook.
Commenting on the result, Artem Zaigrin, chief economist at SOVA Capital, noted:
“The GDP production breakdown points to a shallower contraction in 2Q20, which is in line with releases of consumer-based, industrial-alternative and high-frequency indicators. […] The new release technically brings our FY20 forecast to -4% YoY. However, more efficient fiscal injections, delayed demand in July and August, higher demand for non-food items due to FX volatility and greater tourism activity could provide tailwinds for GDP dynamics in 3Q20. As a result, this could bring further upside risks to our 3Q20 growth forecast, possibly narrowing the contraction gap even more.”