Russia: Pace of economic contraction softens in Q4
GDP fell 1.8% year-on-year in Q4 2020, moderating from the 3.5% contraction seen in the third quarter. Meanwhile, on a seasonally-adjusted quarter-on-quarter basis, GDP dropped 0.2% in Q4, contrasting the previous quarter’s 0.6% increase. Taking the year as a whole, the economy contracted 3.1% year-on-year in 2020, following the previous year’s 2.0% expansion.
Q4’s softer annual contraction mainly reflected an improvement in the domestic economy. Consumer spending fell a less pronounced 5.7% in the quarter compared to Q3’s 9.1% contraction, amid a declining unemployment rate. Moreover, fixed investment shrank a softer 2.1% in Q4 following the previous quarter’s 7.9% fall, while public consumption growth came in at 4.1% (Q3: +4.2% yoy).
On the external front, exports of goods and services declined 6.5% in Q4, softening from Q3’s 8.1% drop, amid a stronger international trading environment and easing Covid-19 restrictions abroad. In addition, imports of goods and services decreased at a less pronounced rate of 5.5% in Q4 (Q3: -19.9% yoy).
Moving forward to this year, GDP is expected to rebound strongly, led by recovering domestic demand as lockdown restrictions are gradually lifted thanks to mass vaccination. Fiscal and monetary stimulus should further cement the upturn. Moreover, strengthening foreign demand and a healthier oil market bode well for the external sector. Geopolitical tensions cloud the outlook, however.