Moderate y-o-y GDP contraction in 1Q23 prompts decent economic growth this year

RUSSIA ECONOMICS - In Brief 18 May 2023 by Evgeny Gavrilenkov

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Rosstat reported that GDP was down by a mere 1.9% y-o-y in 1Q23 which is not bad a result following the 4.5%, 3.5%, 2.7% y-o-y contraction in 2Q22, 3Q22, and 4Q22 and the high base in 1Q22. So far, Rosstat didn’t provide any breakdown of the GDP – just this flash-estimate, which is the usual practice. More detailed information will appear in a few weeks. At glance, it looks as though the economy is heading toward 2.0% growth this year (assuming other factors being equal). Statistics for April will be available in a couple of weeks, and we’ll have more information to adjust our growth forecast 9if necessary). Meanwhile, Rosstat also reported that inflation moderated in May having reached 0.09% MTD on May 15. In the seven days ending on that day, weekly inflation was 0.04% w-o-w. Generally, it looks as though it could be close to 0.2% m-o-m in May, i.e., below 0.4% m-o-m reported for the previous couple of months. However, weekly inflation remains volatile and it can accelerate later this month as inflation could have slowed in the previous couple of weeks amid several additional non-working days (public holidays). As in May 2022 inflation m-o-m was low (0.12%), inflation y-o-y may gradually start climbing up this month but it will still be well below 3%. Nonetheless, as the CBR remains risk averse and, most likely, it won’t cut its key rate in June.