Economic growth picks up in Q4

Economic growth picks up in Q4

Economy shifts into higher gear in Q4:

Economy shifts into higher gear in Q4: GDP growth accelerated to 4.5% year on year in the final quarter of 2024 (Q3: +3.3% yoy), marking the best result since Q1 2024 and exceeding market expectations. On a seasonally adjusted quarter-on-quarter basis, economic growth accelerated to 1.6% in Q4, compared to the previous quarter's 0.9%. In 2024 as a whole, the economy grew 4.3% in 2024, which was above 2023’s 4.1% rise.

GDP growth accelerated to 4.5% year on year in the final quarter of 2024 (Q3: +3.3% yoy), marking the best result since Q1 2024 and exceeding market expectations. On a seasonally adjusted quarter-on-quarter basis, economic growth accelerated to 1.6% in Q4, compared to the previous quarter's 0.9%. In 2024 as a whole, the economy grew 4.3% in 2024, which was above 2023’s 4.1% rise.

Domestic demand loses steam:

Domestic demand loses steam: In Q4, annual GDP growth continued to be primarily fueled by war-time spending, though domestic demand cooled. Despite high wages in the defense industry, private consumption growth eased from 5.1% in Q3 to 4.5% in Q4. Government spending also lost steam, rising 4.5% in Q4 (Q3: +4.8% yoy), as did fixed investment growth, which increased 4.5% in Q4 compared to 7.9% in the prior quarter. On the external front, Western sanctions likely had a limited impact on trade: Goods exports expanded 7.2% in Q4, following Q3’s flat reading, and marked the joint-highest best since Q2 2022. Meanwhile, goods imports grew 11.2% in Q4 (Q3: +3.4% yoy).

In Q4, annual GDP growth continued to be primarily fueled by war-time spending, though domestic demand cooled. Despite high wages in the defense industry, private consumption growth eased from 5.1% in Q3 to 4.5% in Q4. Government spending also lost steam, rising 4.5% in Q4 (Q3: +4.8% yoy), as did fixed investment growth, which increased 4.5% in Q4 compared to 7.9% in the prior quarter. On the external front, Western sanctions likely had a limited impact on trade: Goods exports expanded 7.2% in Q4, following Q3’s flat reading, and marked the joint-highest best since Q2 2022. Meanwhile, goods imports grew 11.2% in Q4 (Q3: +3.4% yoy).

GDP growth to cool in 2025:

GDP growth to cool in 2025: Our panelists see GDP growth decelerating from Q4’s level by end-2025 as a result of the high interest rates adopted to cool inflationary pressures flared by the war and its resulting labor shortages. In 2025 as a whole, the economy should lose steam from 2024 as tight monetary policy is set to cap domestic demand. Lower oil prices, a protracted war and the challenges arising from global trade turmoil pose downside risks for GDP growth.

Our panelists see GDP growth decelerating from Q4’s level by end-2025 as a result of the high interest rates adopted to cool inflationary pressures flared by the war and its resulting labor shortages. In 2025 as a whole, the economy should lose steam from 2024 as tight monetary policy is set to cap domestic demand. Lower oil prices, a protracted war and the challenges arising from global trade turmoil pose downside risks for GDP growth.

Panelist insight:

Panelist insight: EIU analysts said: “Demographic challenges and labour shortages, as well as years of economic strain and potential tax increases—limiting consumer spending power—will prevent faster economic growth. […] There also remains the possibility that the two sides cannot agree terms and that fighting resumes. In this case, the ongoing strain on the Russian economy would change the forecast trajectory significantly, with likely extremely muted growth throughout the forecast period and increasing potential for a full-year recession within the next two years, amid ongoing economic distortions.”

EIU analysts said: “Demographic challenges and labour shortages, as well as years of economic strain and potential tax increases—limiting consumer spending power—will prevent faster economic growth. […] There also remains the possibility that the two sides cannot agree terms and that fighting resumes. In this case, the ongoing strain on the Russian economy would change the forecast trajectory significantly, with likely extremely muted growth throughout the forecast period and increasing potential for a full-year recession within the next two years, amid ongoing economic distortions.”

Consensus Forecasts and Projections for the next ten years

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Russian exports projections for the next ten years from a panel of 13 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable exports forecast available for Russian exports.

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