Russia: Russian economy contracts less than expected
May 15, 2015
Many economic analysts were expecting that Western sanctions, a sharp fall in the Russian ruble and high financing costs could cause a collapse of the Russian economy at the beginning of 2015. However, a preliminary estimate released by the Federal Statistics Service (Rosstat) on 15 May showed that Russia’s Q1 GDP contracted 1.9% over the same quarter last year. Q1’s result followed a lackluster 0.4% expansion in Q4 2014 but came in stronger than the average 2.6% decrease that the markets had expected. Although the Q1’s print was stronger than expected, it represented the first contraction since Q4 2009.
Although a detailed breakdown of data was not released with the preliminary estimate, additional economic information suggests that the more modest than expected decline reflected weaker domestic demand, especially private consumption and fixed investment, but a healthier contribution from net exports to overall growth from a contraction in imports. On the production side, agriculture, manufacturing output and mining fared better than services.