Russia: Growth accelerates in Q3 on firmer domestic demand
Annual growth accelerated to 1.7% in the third quarter of 2019, as revealed by the third estimate of national accounts data released by Rosstat on 30 December. This was nearly double the second quarter’s 0.9% expansion and matched both the preliminary figure and the second estimate released earlier in the year.
A notable pick-up in domestic demand led the third-quarter acceleration. Household consumption rose 3.1% on an annual basis, the strongest expansion in nearly two years (Q2: +2.8% year-on-year) amid sustained labor market tightening and slowly improving sentiment among consumers. Additionally, public spending gathered some momentum (Q3: +0.4% yoy; Q2: +0.2% yoy), although it remained subdued. Meanwhile, fixed investment lost pace, growing 0.7% year-on-year in Q3 (Q2: +1.0% yoy).
On the external front, metrics remained downbeat, weighing on the overall expansion. Exports contracted for the third quarter in a row, albeit less so than in Q2 (Q3: -1.1% yoy; Q2: -4.9% yoy) amid global trade uncertainties and lackluster demand. Imports, meanwhile, jumped 4.0% year-on-year (Q2: +0.1%), largely reflecting stronger demand dynamics at home. Taken together, the external sector’s performance subtracted from overall growth again in the third quarter.
Growth should firm up this year, mostly on overdue fiscal stimulus and a more accommodative monetary policy, both of which are seen propping up domestic demand. That said, further delays to the government’s infrastructure investment program, uncertainty over U.S. sanctions amid the 2020 U.S. elections, volatile commodity prices and trade wars threaten the outlook.