Russia: Russia's GDP shrinks in Q2, outlook for the economy is uncertain
August 10, 2015
Weakness in private consumption and investment likely caused the sharp contraction of the Russian economy in the second quarter of 2015. Moreover, the recent decline in global oil prices and a substantial depreciation of the ruble suggest downside risks for the outlook. According to a preliminary estimate published by the Federal Statistics Service (Rosstat) on 10 August, Russia’s GDP shrank 4.6% in Q2 over the same quarter last year, which came in below the 2.2% contraction registered in Q1. If the preliminary estimate is confirmed, the contraction will be the sharpest in six years. Q2’s decrease was slightly worse than the 4.5% drop the markets had expected. The Economy Ministry had estimated that overall output contracted 4.4% in Q2, calling it “the lowest point” for the Russian downturn.
Although a detailed breakdown of data was not released with the preliminary estimate, high frequency indicators suggest that the contraction was caused by weaker domestic demand, especially private consumption and fixed investment.
Author: Ricardo Aceves, Senior Economist