Consumption in Russia

Russia - Consumption

Economy grows at strongest pace this year in Q3

Annual GDP growth rose to a year-to-date high of 1.7% in the third quarter of 2019, according to a second estimate released by Rosstat on 12 December. The print was nearly double the second quarter’s 0.9% expansion and matched the preliminary figure.

A notable upturn in the all-important manufacturing sector (Q3: +2.5% year-on-year; Q2: +0.6% yoy) led the acceleration. Furthermore, activity in the agriculture, forestry and fishing sector jumped to 2.6% in Q3, up considerably from Q2’s 0.1% uptick amid a stronger harvest in the quarter. Meanwhile, retail and wholesale trade activities rebounded in the third quarter (Q3: +2.2% yoy; Q2: -0.6% yoy), hinting at stronger consumer demand and healthier private sector conditions.

On a less positive note, dynamics in the mining sector weakened in the third quarter (Q3: +2.0% yoy; Q2: +3.0% yoy). This, coupled with a softer increase in electricity, gas and steam, and air conditioning output (Q3: +2.0% yoy; Q2: +2.3% yoy), curbed the overall acceleration.

Looking ahead, growth is expected to strengthen next year, chiefly thanks to overdue fiscal stimulus and a more accommodative monetary policy environment, which are seen propping up domestic demand. That said, further delays to the government’s infrastructure investment program, uncertainty over U.S. sanctions ahead of 2020 elections, volatile commodity prices and ongoing trade wars remain major downside risks to the outlook.

Russia’s Central Bank sees the economy growing between 1.5% and 2.0% in 2020, and between 1.5% and 2.5% in 2021. Meanwhile, FocusEconomics Consensus Forecast panelists see GDP expanding 1.7% in 2020, which is unchanged from last month’s forecast, and 1.9% in 2021.