Economic performance in November exceeded expectations

RUSSIA ECONOMICS - In Brief 29 Dec 2022 by Alexander Kudrin

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Amid strong monthly economic growth in 4Q21, which caused a high base effect, the country's economic performance looked quite good as most indicators grew above m-o-m in seasonally adjusted terms, which resulted either in stronger y-o-y growth numbers or less significant contraction. According to Rosstat, paid consumer services were up by 2.0% in November and by 3.4% in 11M22 (both y-o-y). Services grew strongly in 1Q22 amid the low base effect, but then growth decelerated sharply. Retail sales continued to slowly but steadily rebound but they were still down in 11M22 by 6.2% y-o-y. The decline was mostly caused by the collapse of non-food retail amid restrictions imposed by "unfriendly" countries on trade with Russia. One may expect them to grow in 2023, albeit moderately. Construction was up y-o-y by 8.7% and 6.1% in November and 11M22. In 2023 construction will likely expand more moderately. The transportation sector was down y-o-y by a mere 2.4% y-o-y, while agriculture grew by 4.7% in 11M22. Seasonally adjusted industrial output grew by 0.7% m-o-m for a second month in a row and in 11M22 it was down just by 0.1% y-o-y. Both mining and manufacturing grew m-o-m in seasonally adjusted terms. In 11M22 manufacturing was down y-o-y by a mere 0.8% while mining grew by 1.1%. As a result, the output of the basic sectors (a monthly measure of an aggregate economic activity was down by 1.2% y-o-y in 11M22 hinting that the Russian GDP may contract very moderately this year (probably even less than 2%) while chances for positive growth in 2023 increased (assuming factors being equal, i.e., no serious geopolitical socks). Evgeny Gavrilenkov Alexander Kudrin