Russian GDP: Growth of around 2% expected in 2020
Russia's GDP was up 1.3% in 2019, according to Rosstat, well below the 2.5% growth in 2018. Despite the fact that economic growth accelerated in 2H19 the annual growth figure came as no surprise given that GDP was reportedly up only by 0.9% y-o-y in 1H19.
The 2017 and 2018 GDP growth numbers were recently revised higher again – this time from 1.6% to 1.8% and from 2.3% to the aforementioned 2.5%. Generally, these revisions are fully in line with our long-standing point of view at GKEM Analytica that the Russian economy has been doing somewhat better recently than the official statistics initially showed. The same can be said about 2019, and upward revisions of the annual and quarterly GDP statistics are expected.
Around 2.0% and possibly faster is what Russia can deliver in 2020 in terms of GDP growth despite the fact that trends in the foreign trade accounts appear less certain now given the risks associated with the new virus, the deceleration of Chinese growth and the lack of steam in Europe’s economy. Russia’s moderate growth will be secured by domestic demand and investment.
* Rosstat reported that y-o-y retail sales growth in December 2019 was generally the same as in the other two months of the fourth quarter - retail sales grew by 1.9% that month and 2.0% y-o-y in 4Q19. This was twice as high as in 3Q19, and the decelerated inflation was one of the major factors behind this bounce. Given that retail sales this year are expected to grow somewhat faster than in 2019 amid continuing disinflation, household consumption is expected to look stronger as well, while government consumption growth will decelerate. Final consumption growth is expected to remain stable – over 2.0%.
* Rosstat reported a rather slow growth of construction and investment in production capacity in 2019. Construction (as an SNA category) was up only 0.4% in 2019, while production of major construction materials, such as cement and ready-mix concrete, was sharply higher.
* Hence, either construction activity will be more fully recorded in 2020, i. e., “absorbing” some unfinished works from 2019, or the 2019 data will be revised. At least 2.0% growth of gross investment is likely.
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