Russia: Second estimate points to softer GDP contraction in Q3
According to a second estimate released by Rosstat on 11 December, GDP contracted 3.4% year-on-year in the third quarter. The result marked a considerable improvement from the second quarter’s 8.0% plunge and came in slightly above the preliminary estimate of a 3.6% drop. Meanwhile, economic activity rebounded and grew 0.7% in seasonally-adjusted quarter-on-quarter terms (Q2: -2.8% s.a. qoq).
The third quarter’s improvement was chiefly led by a recovery in the manufacturing sector, where output was unchanged on an annual basis following a sharp drop in Q2. Moreover, activity in the wholesale and retail trade sector nearly returned to pre-pandemic levels, while construction, and electricity and gas supply output fell at a softer pace in Q3. Furthermore, agricultural production gained steam in the quarter. That said, the mining sector remained in the doldrums amid constrained oil production and still-low global crude prices, weighing on the overall result in turn.
Looking ahead, the economic panorama appears grim at the tail end of this year, amid a spiraling number of new Covid-19 cases and associated lockdown measures. More positively, however, the economy should rebound next year as mass vaccination is rolled out and the effects of the pandemic fade. Strengthening consumer demand and a healthier external backdrop will lead the recovery, with fiscal and monetary stimulus expected to further cement the rebound.
Commenting on the economic outlook, Artem Zaigrin, chief economist at Sova Capital, noted:
“Russia’s economic performance in 4Q20 will likely be worse than in 3Q20 as the Covid-19 situation worsens, acting as a drag on mobility and services consumption. Many regions are reinstating restrictions to discourage people from visiting shopping malls and other public spaces. […] We remain comfortable with our FY20 GDP forecast of a 3.5% YoY decline, as the second wave of Covid-19 has forced us to acknowledge downsides to our 4Q20 forecast of a 4% YoY contraction, revising it to a drop of 4.2% YoY. The deteriorating epidemiological situation leads to downside risks to our 2021 forecast of GDP rebounding to a growth of 2.8% YoY, while the mass vaccination campaign could offset these effects.”