Russia International Reserves (USD bn)

International Reserves in Russia

The economy shrank at a softer annual pace of 1.9% in Q1, marking the softest downturn since Russia’s invasion of Ukraine pushed activity into contraction in Q2 2022. The milder contraction came on the back of a stronger industrial sector and resilient consumer demand amid the government’s spending boost. Turning to Q2, the economy seems on track to exit the recession. Economic activity jumped 3.3% annually in April, marking the first expansion since February 2022. This was chiefly due to expansions in retail sales and industrial output, and as a tight labor market and supportive fiscal spending likely boosted total consumption. PMI data suggests that activity expanded again in May, reflecting the economy’s resilience to international sanctions. In other news, all eyes are now on the expected Ukrainian counteroffensive, which could be decisive in the eventual settlement of the conflict.