Russian macro: GDP can grow above 4% in 2024 if PM’s 1Q24 number is correct
On May 12, the recently re-appointed PM Mr. Mishustin, while speaking in the Duma, announced that in 1Q24, the country’s GDP grew by 5.4% y-o-y. The number came from the latest Economics Ministry publication. Interestingly, the Ministry upgraded its 2024 growth forecast at the end of April to 2.8% from the previous 2.3%. The announced 5.4% 1Q24 y-o-y growth is not an official Rosstat number—it is an estimate by the Economics Ministry based on its monthly GDP estimates (Rosstat will release its preliminary 1Q24 growth flash estimate on May 15). The ministry announced that in March, the country’s GDP grew by 4.2%—down from 7.6% y-o-y in February, when an additional calendar day inflated the y-o-y growth statistics. A leap-year effect also contributed to stronger economic growth in 1Q24. GDP grew by 4.9% y-o-y in 4Q23, and by 3.6% in 2023 as a whole.
The conclusion from the recently published statistical data is that domestic demand will perform better than we considered previously. Government demand will continue to expand fast enough, supported by growing budgetary spending—even though nominal federal budget expenditure will rise moderately. Our baseline scenario outcome suggests that GDP growth could even accelerate this year, and 4% (or an even higher number) cannot be ruled out. This outlook is slightly rosier than our previous 3.4% forecast, but most important is not these figures themselves, but the fact that economic growth may not only accelerate in 2024 but set up a better base for 2025.
When several months ago we published our previous 2024 GDP growth outlook, the main reason domestic demand decelerated this year was weaker lending to households. However, now it looks as though credit growth will remain strong enough for the rest of the year. On top of that, external pressure and the need to rearrange foreign trade flows and further cut trade with Western countries will remain a challenge not only this year but next year as well. These efforts will require new investments. Hence investment in infrastructure and new production capacity will continue.
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