Russia GDP Q1 2021

Russia: Pace of economic contraction softens in Q1

The economy contracted 1.0% year-on-year in the first quarter of 2021, according to a preliminary estimate released by Rosstat on 17 May. While the result reflected an improvement from the previous quarter’s 1.8% decline, it still marked the fourth consecutive quarter of contracting economic activity amid the ongoing impact of the coronavirus pandemic.

Although a breakdown by components is not yet available, Q1’s overall improvement was seemingly spearheaded by a sturdier industrial sector amid higher global oil prices and less constrained domestic crude output, and recovering services activity as the easing of lockdown restrictions began to gradually release pent-up consumer demand.

Looking ahead, GDP is expected to rebound this year, as the lifting of restrictions at home amid the accelerating vaccine rollout revives domestic demand. In a similar fashion, global vaccination campaigns should rekindle foreign demand, which, coupled with a healthier global oil market overall, bodes well for the external sector.

Commenting on the result, Artem Zaigrin, Chief Economist at SOVA Capital, noted:

“As we noted after the release of the key economic indicators for March, both production and consumption indicators pointed to a strong recovery momentum when accounting for the low base, calendar days and precautionary demands.”

On the outlook, Artem Zaigrin said:

“Going forward, the YoY pace suggests a spike in 2Q21 due to base effects related to lockdowns and OPEC+, but the most important question is whether the recovery momentum will be sustained on a QoQ basis […] We see a greater chance that the upside risks to 1Q21 SA QoQ growth rates will materialize this year and keep the recovery momentum high, e.g. the very gradual recovery in outbound tourism will promote greater consumption at home. As such, we revise our 2Q21 and 2021 forecasts to respective growths of 8.5% YoY and 3.4% YoY.”

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