December statistics leaves mixed impression, inflation remains elevated in the early 2023

RUSSIA ECONOMICS - In Brief 08 Feb 2023 by Alexander Kudrin

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Rosstat reported that the output of the five basic sectors was down in 2022 by a mere 1.3%, while in December alone, it was down by 4.3% y-o-y. The performance in various sectors was quite uneven as construction grew by 5.2% and 6.9% in 2022 and December (y-o-y in the latter case). Agricultural output grew by 10.2% in 2022, while retail sales were down by 6.7%. In December alone, retail sales decreased by 10.5% y-o-y. Transport was down by 2.6%, and industrial output declined by 0.6% in 2022.Overall, it looks as though GDP shrank not too much in 2022 (possibly by around 2.4%). However, the performance in various sectors was very different, as some of them posted not encouraging results in December.Meanwhile, inflation w-o-w reached 0.26% in seven days ending on February 6. So far, it shows no signs of deceleration, as it was at 1.00% YTD on the same day. The effect of a historically high December budgetary spending spree and a very high federal budget deficit in January will translate into high inflation for some time. Moreover, the federal budget deficit will likely remain more significant than the government anticipates, which may keep inflation elevated going forward. Evgeny Gavrilenkov Alexander Kudrin