Russia: Growth plummets in Q1 on broad-based frailties
June 19, 2019
GDP growth plunged to 0.5% year-on-year in the first quarter of 2019, according to a second estimate released by Rosstat. This was notably below Q4’s 2.7% outturn and matched the preliminary figure.
A breakdown by sectors revealed broad-based weakness across the economy. Notably, the wholesale and retail trade sector contracted 3.0% in annual terms, weighed on by the hike in the VAT that was introduced in January. In addition, the agricultural sector swung to contraction, declining 1.2% annually in Q1 (Q4: +2.3% year-on-year), while growth in the manufacturing sector picked up pace but remained muted (Q1: +0.6% yoy; Q4: +0.2% yoy). The construction sector also ground to a halt, recording zero growth after several major infrastructure projects were completed in 2018, while the government’s ‘National Projects’ program is off to a slow start.
Meanwhile, growth in the mining sector was relatively robust, clocking in at 4.6% in Q1, but was well below Q4’s multi-year high of 7.7% nonetheless. Although higher oil prices boosted the sector, soft demand from Europe—due to a relatively mild winter—and constrained output dragged on growth. On a more positive note, financial and insurance activities expanded at a brisk pace of 7.6% in the first quarter, broadly unchanged from Q4’s result.
Looking ahead, growth is seen slowing notably in 2019 on dampened household spending and limited oil exports.
Russia GDP Forecast
FocusEconomics Consensus Forecast panelists project that Russia’s GDP will increase 1.4% in 2019, which is unchanged from last month’s forecast. Panelists project the economy will expand 1.8% in 2020.