Russia: GDP rebounds in 2021
GDP expanded 4.7% year-on-year in 2021, rebounding from 2020’s 2.7% contraction. The reading marked the strongest upturn since 2008. However, it was partly due a low base effect following the pandemic-induced shock. Although quarterly data has not been released, the figure for the full year suggests that growth likely picked up in Q4, on the heels of Q3’s 4.3% year-on-year increase.
Last year’s recovery was broad-based. Private consumption jumped 9.6% annually in 2021 (2020: -6.3%) and, coupled with a firm rebound in fixed investment (2021: +7.4%; 2020: -4.4%), drove the strong rebound in domestic demand. In contrast, government spending growth nearly halved to 1.1% annually in 2021, from 1.9% in 2020, thus capping the overall recovery somewhat.
On the external front, exports of goods and services bounced back, increasing 3.2% year-on-year in 2021, compared to a 4.1% contraction in the prior year. That said, the rebound in exports was more than offset by a marked recovery in imports of goods and services, which surged 16.7% on an annual basis last year (2020: -12.1%).
Looking ahead, GDP growth is expected to moderate notably this year, amid a fading base effect and the normalization of demand conditions at home and externally. That said, recent geopolitical developments bode ill for the outlook. On 21 February, Russia recognized the Donetsk People’s Republic and Luhansk People’s Republic—separatist enclaves in eastern Ukraine—as sovereign states and President Putin then issued an order to send in military support to these regions. In response, members of the international community announced sanctions targeting Russia’s energy sector, financial system, and technology imports, and promised more extensive sanctions in the event of further conflict escalation. This scenario would see 2022 growth projections slashed by our panelists.
Commenting on the GDP outlook, Artem Zaigrin, chief economist at SOVA Capital, said:
“November GDP was up 5.2% yoy after 4.8% yoy in October, vs. 4.3% yoy in Q3 2021. […] The worsened epidemiological situation brought fewer drags to the economic performance than expected. We see more upside risks to the GDP being above our 4.5% yoy forecast this year. Going forward, the labor market constraints and persisting bottlenecks in the global supply chains might bring the economy to an overheated state and weaken the growth momentum. We expect GDP growth to slow to 2.7% yoy.”