Economic growth remains decent in 11M24, set to decelerate in 2025

RUSSIA ECONOMICS - In Brief 07 Jan 2025 by Evgeny Gavrilenkov

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Rosstat reported that the output of the five basic sectors (industry, agriculture, construction, transportation, and trade) grew y-o-y by 4.6% and 3.7% in 11M24 and November alone. Economic growth expectedly decelerates, though in 2025 it may still be higher than in 2023, but below 4.0%. In 9M24, GDP grew by4.2% y-o-y. Economic growth remains uneven across segments as in 11M24 retail sales grew y-o-y by 7.4%, agriculture contracted by 3.5%, and construction was up by a mere 2.0%. Industry grew by 4.3% over the same period.In 2025, economic growth will likely decelerate as consumer demand won’t be as fueled by household lending as it was in 2023-2024. Credit growth will moderate being dragged by high interest rates. High inflation will also negatively affect consumer demand, especially for low income groups of the population, such as pensioners, which are quite a sizable chunk of the country’s population. Rosstat reported that by the end of 2024, real pensions were below their average monthly 2021 level, while real wages were somewhat 20% higher. A one-off indexation of pensions every January (adjusting for past inflation) looks not enough as inflation remains perpetually high. In 11M24 real pensions contracted y-o-y by 0.7% while real wages grew by 7.6% as nominal wages increased by 17.9%. We expect some moderation of nominal wage growth this year, despite the fact that unemployment remains low (2.3%) and the lack of a labor force pushes wages up. Overall, we expect Russian GDP to grow well above 3.0% this year. Going forward, however, economic growth may be increasingly dragged on by a shrinking population, and there are no signs yet that demographic trends could impr...