Russian macro: Revised GDP stats hint the economy may accelerate in 2024 as its growth model evolves
Rosstat reported that Russia's GDP grew by 3.0% y-o-y in 9M23, which looked better than one could have expected at the beginning of last year. In 3Q23, GDP increased by 5.5%, up from 4.9% in 2Q23. The nation’s economy contracted by 1.8% in 1Q23 (all numbers are y-o-y). At the same time Rosstat recently announced it had revised some historical data, such as GDP accounts for 2021 and 2022. The statistical agency was in the process of revising some monthly economic statistics, including for previous years, during the entire year 2023. Hence, the recent revision of the GDP statistics is in line with the previous efforts of Rosstat. Russia’s economic growth in 2022-2023 was largely fueled by continuously inflating budgetary spending and a rapid expansion of household credit—not least due to subsidized mortgages. Rapidly growing wages also encouraged people to borrow too bravely. Hence inflation accelerated as well.
The economy grew by about 18.0% with average annual GDP growth of about 1.4% in the past twelve years (starting from 2012), and in recent years the economy has performed somewhat better. Russia's macroeconomic policy had to change considerably in the new geopolitical environment—it had to switch from saving cash in the National Wealth Fund to greater budgetary spending. This took place, and this shift helped to avoid technical recession in 2022 (apart from a one-off dip in 2Q22). Meanwhile, it was not only the budgetary impact that helped to smooth out the effect of an almost complete break in economic relations with the West in 2022 and 2023. The sanctions imposed on Russia contributed to thriftier use of earnings generated domestically, i.e., reduced capital outflow and outgoing transfers of income. Generated cash is now recycled domestically in greater amounts. Hence not only have the authorities stopped saving in unfriendly jurisdictions, but businesses and ordinary people have, as well. The only question is whether the recently emerged institutional framework can prove to be sustainable and secure decent rates of economic growth in the medium and long term.
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