Economic growth in 2Q23 slightly exceeded expectations

RUSSIA ECONOMICS - In Brief 14 Aug 2023 by Evgeny Gavrilenkov

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Rosstat reported that the country's GDP grew by 4.9% y-o-y in 2Q13. It was a flash estimate with no details. In a few weeks Rosstat will provide more color on 2Q23 economic growth, including nominal GDP numbers, including its sectoral structure, etc. Moreover, it may even update the aforementioned growth number itself – as has occasionally happened in the past. At a glance, the currently available flash estimate looks not too bad and appears a bit higher than our quarterly forecast of economic growth (4.8% y-o-y). As we expected 2.5% GDP growth this year with some potential for upside, the recently published numbers don't contradict our thinking. One may estimate that in 1H23 the economy grew by about 1.5-1.6% (having contracted by 1.8% y-o-y in 1Q23) – the range is due to possible rounding errors. So far, the economy is on the rise Q-o-Q in seasonally adjusted terms and the weakened ruble was one of the factors that supported domestic producers in 1H13. Last year's ruble's average level (well below $/RUB 70) looked abnormally strong – even compared to 2021. The most recent developments with the ruble surpassing the $/RUB 100, is something new which may trigger some action from the regulators. Indeed, since May-June the ruble has lost about a quarter of its value as it fluctuated close to $/RUB 80 back then. Yet, we don't see much problem with the current weakness of the ruble as it will boost federal budget revenues. If the authorities will be able to refrain from massive budgetary amendments and keep spending at bay, things may stabilize on the FX market as the weakened ruble will trim imports (the latter already stopped growing m-o-m in June according to recent CBR ...